A commission appointed by President Hamid Karzai to assess responsibility for the massive fraud at Kabul Bank issued its report on Sunday, absolving the president’s brother of any blame.
Kabulbank, a failed Afghan bank, doled out nearly half a billion dollars in unsecured, undocumented loans to a roster of Kabul’s elite, including sitting cabinet ministers and a powerful former warlord, anti-corruption officials said on Sunday.
Azizullah Luddin, chairman of the High Office of Oversight and Anti-corruption, also said that records suggested the government would only be able to get back around two thirds of Kabulbank’s $925m in outstanding loans.
Afghan President Hamid Karzai’s brother, Mahmoud Karzai, was among the bank’s politically connected shareholders and insiders who took out those loans, Ludin said.
“We are sure that $347m will be paid back which we have no worries about,” he told a news conference to release the findings of a report detailing the bank’s woes.
“Other borrowers have properties in Dubai and in Kabul and in case they aren’t able to pay back, we can get $200-$250m by selling them... So we can get back a possible total of around $600m,” he added.
Abdul Qadir Fitrat, a Central Bank governor, recently told Parliament that Mahmoud Karzai still owed the bank $22m, which the latter denied.
On Mahmoud Karzai, a businessman with dual Afghan-American nationality, the commission accepted his view that he had paid off all of his obligations to the bank, $4.2m. “He is not guilty,” Ludin said. “He has no problem.” The other $18m charged to Karzai comprised an $8m loan to buy a villa on Palm Island in Dubai, a $6m loan to buy shares in the bank, and accumulated interest of about $4m.
Karzai maintains that the deed to that villa was in the name of the bank’s chairman, Sherkhan Farnood, and that he was only a tenant there. And he says that since the bank has been in effect taken over by the government, his obligations to pay for shares in the bank have been erased.
The bank, whose major shareholders had close family ties to Afghanistan’s leadership, came to the brink of collapse last year and was taken over by the Central Bank.
The Afghan government has since pledged to dismantle it, to meet International Monetary Fund requirements on financial standards, but progress has been very slow.
Ludin said three or four sitting cabinet ministers, several MPs and Abdul Rashid Dostum, a power broker and former warlord, were among the names on a list of debtors who had evaded usual banking standards to secure a loan.
“$467 million dollars has been paid out without any documents or any guarantees or papers,” Ludin said.
“We might be able to get back large amount of this money because we have prepared a list of 207 borrowers,” he said.
Dostum owed around $1m to the bank, he added. But both Ludin and Yasin Usmani, chairman of the Anti-Corruption Monitoring and Evaluation Committee, placed most of the blame for Kabulbank’s failure at the door of the Central Bank, rather than with Kabulbank’s owners and top managers.
These include Mahmoud Karzai and Mohammad Haseen, brother of the deputy president.
Ludin said Afghanistan’s intelligence agency had warned the Central Bank months ago there were major problems in Kabulbank’s finances, but had been told that it was not their business.
Individuals in the financial sector also tried to raise a red flag with the auditors, Usmani said.
“We blame the Central Bank because their monitoring was very weak,” he said, adding that he thought all private banks in Afghanistan needed more rigorous checks.
The 30-page report, which Ludin waved around during the news conference, has been delivered to President Karzai and the Attorney General. They will decide whether to release it to the public and whether to pursue any prosecution, he said.
The tangled state of the bank's finances was evident even at the news conference, where officials gave figures $13m apart for the total amount of loans outstanding.
They later explained the higher figure came from an updated calculation of interest due. But other figures for the amounts repaid and still outstanding, and summaries of different types of loan, had discrepancies of several million dollars.