“Kabul Bank scam involved up to 40”

40 people were involved in scams to bilk hundreds of millions of dollars from the Kabul Bank.

Updated: Aug 01, 2011, 00:34 AM IST

Kabul: As many as 40 people were allegedly involved in scams to bilk hundreds of millions of dollars from the Kabul Bank, and nearly half the cases will be sent to the Afghan court system next week, a top Afghan prosecutor said Sunday.

The charges are the first to be referred to Afghan courts in connection with the bank`s near collapse last year because of mismanagement and questionable lending. A USAID inspector general report estimated that $850 million in loans were diverted to bank insiders.

The troubled Kabul Bank, which is now partly controlled by the Afghan central bank and the Ministry of Finance, has become a symbol of the country`s deep-rooted corruption. The case is being closely followed by Afghans and international donors because it is a barometer of officials` pledge to root out patronage, graft and show accountability to world financial institutions, such as the International Monetary Fund.

Deputy Attorney General Rahmatullah Nazari said the charging papers would name Sherkhan Farnood, the former chairman of Kabul Bank and a world-class poker player; Khalilullah Ferozi, the former chief executive officer who has been cooperating with prosecutors; and more than two dozen other current and former employees of Kabul Bank and the Afghan Central Bank.

"It`s a very big case and not a simple case," Nazari told The Associated Press in an interview in the Afghan Attorney General`s compound, adding that the allegations include corruption, abuse of authority, preparing fake loan documents or receiving illegal loans. He said between 30 to 40 people were involved in the scams.

The names of about 15 individuals, including the two former bank executives who are being held in a Kabul detention center, will be the first submitted to the courts, Nazari said. In addition, a team of prosecutors continues to investigate allegations of impropriety against another 15 or so individuals who have fled the country since the bank crisis unfolded last year.

"All of these people are accused. We have strong evidence against them, and I think they will be sentenced to jail," Nazari said through a translator. "If a person is involved in the corruption of some $900 million and is not sentenced or given any punishment, what will happen to people who are involved in the corruption of just $1 million."

During his visit to Afghanistan on Sunday, US Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, expressed concern about endemic corruption and cronyism, which he said was rife throughout the nation. He said the Afghan people needed to see prosections as tangible results of work to fight corruption.

"I have been focused on and an advocate for the need to address the corruption issue ... from the very beginning," Mullen told reporters at a news conference in Kabul.

"Issues like the Kabul Bank and the criminal patronage networks are issues that must be addressed."

Among the individuals whom prosecutors want to see returned to Afghanistan for questioning are Shairn Khan, the brother of the former Kabul Bank chairman, and Abdul Qadir Fitrat, the former governor of the Afghan central bank.

Fitrat, who fled to northern Virginia in late June,has said he left Afghanistan after receiving threats to his life. He complained that he was being scapegoated while the Afghan government had refused to charge politically connected individuals involved in making or receiving hundreds of millions of dollars in questionable loans.

After Fitrat left, Nazari said the former central bank head faced allegations of failing to act on warnings about widespread corruption at Kabul Bank. Nazari said an arrest warrant for Fitrat had been sent to Interpol and the U.S. Embassy in Kabul.

Fitrat, however, said he had permanent resident status in the United States and would not be returning to Afghanistan.

While the prosecutions move forward, Afghan officials are trying to get borrowers to repay loans worth $914 million, including interest, Nazari said. So far, $70 million has been repaid and "we know we are going to get back" another $49 million to $50 million plus interest, he said.

He said prosecutors had identified 413 loans made with fake documents, but did not know how much money those loans represented. Afghanistan`s anti-corruption office reported in May that $468 million in loans were made without appropriate documentation.

Other money is being recouped through the sale of property and companies purchased or set up with loans from Kabul Bank.

Bakhter TV, an Afghan television network, which was owned by a former Kabul Bank executive, has been sold for about $1 million, Nazari said. Authorities also are trying to sell Pamir Airways, a multimillion-dollar Afghan airline established with loans from the bank, he said.

In addition, Afghan authorities are trying to sell property worth an estimated $300 million that the two bank executives own in Afghanistan and Dubai, United Arab Emirates. Some of the questionable loans were used to buy luxurious mansions in Dubai and invest in risky prestige projects like the airline and shopping malls in Kabul.

Farnood and Ferozi each had owned 28 percent of the bank`s shares. President Hamid Karzai`s brother, Mahmood Karzai, was the bank`s third largest shareholder with 7 percent. Haseen Fahim, a brother of one of the nation`s two vice presidents, also owned shares of Kabul Bank.

Nazari said Mahmood Karzai and Fahim had repaid most of what they borrowed from the bank.

Bureau Report