Politics hampers probe of Kabul Bank collapse

Nepotism and fraud among problems cited

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KABUL, Afghanistan — Political interference stymied an investigation into the collapse of Afghanistan’s largest bank, according to an independent report on how the men at Kabul Bank and their friends and relatives got rich off $861 million in fraudulent loans.

The 87-page report, released Wednesday, details how politics played a role in who was charged in the case and why it took prosecutors so long to render indictments. Its findings reinforce the image of Afghanistan as deeply corrupt.

If those who carried out the fraud are not punished, it likely will be more difficult for the West to donate money to this impoverished nation where U.S. and NATO forces are trying to extricate themselves from an 11-year-old war.

The bank’s collapse and subsequent bailout represents more than 5 percent of Afghanistan’s gross domestic product, making it one of the largest banking failures in the world. Hundreds of millions of dollars were sent out of Afghanistan – some in airplane food trays.

The report depicts the Kabul Bank scandal as a saga about money-grabbing, weak banking oversight, lax prosecution, nepotism and fraud.

The cast of characters includes a poker-playing bank chairman, an Afghan central bank head who feared his life was endangered and fled to the U.S., the wealthy relatives of the Afghan president and vice president, and bank shareholders – some who bought posh properties in Dubai and spent lavishly on themselves and their circle of friends and relatives.

The bank, which was licensed in 2004 and grew to become Afghanistan’s largest financial institution, was run like a Ponzi scheme under nascent banking oversight, according to the Independent Joint Anti-Corruption Monitoring and Evaluation Committee, which issued the report.

It claims a special judicial tribunal that started hearing the case this month is involved in activities that are “well outside the legal norms of criminal procedure.”

The report says the tribunal has had off-the-record meetings with accused individuals and potential witnesses, has conducted its own probes on the sidelines and has held meetings with shareholders, urging them to repay money.

Getting the money back is the job of the receivership, which as of Oct. 31 has recovered $135.3 million in cash as well as assets with a book value of $181.1 million.

Drago Kos, chairman of the committee, told reporters at a news conference in Kabul that Afghan officials were “deferring questions to political parties” rather than acting independently to investigate, prosecute and try the case.

“We also see some cases of direct political interference from above,” Mr. Kos said.

The report does not specify who was involved in the political interference. The committee said it did not come across any documents indicating that the presidential palace was meddling in the case.

However, the report says that after an investigative commission that President Hamid Karzai set up to look into the scandal issued its own report, the commission “publicly announced that the president would decide who to prosecute based on its recommendation.”

The committee also criticized the attorney general’s office for not undertaking a substantial probe into the bank until April 2011 – a year after the news of the bank’s problems surfaced, eight months after nervous customers ran to withdraw deposits and five months after the central bank asked the attorney general’s office to start a criminal investigation.

Although criminal indictments were prepared by the attorney general’s office around May 2011, the indictment was not issued until more than a year later, according to the report.

The indictment names more than 20 bank executives, bank employees, central bank workers and others said to have benefited from the fraud. The charges include money laundering, misuse of authority, using counterfeit documents and opening accounts under pseudonyms.

But the report says the indictment is tainted by political influence.

The report says the indictment did not name officials from accounting firms that created false documents for Kabul Bank, airline employees who smuggled money out of Afghanistan or some shareholders who received funds from loans at zero interest, “apparently with no intention of repayment.”

Basir Azizi, a spokesman for the attorney general’s office, said Tuesday that the Kabul Bank case was not treated as a political issue. “We strongly reject any comments that the attorney general’s office dealt with this case as a political issue,” he said.

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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