Report: Afghan politics hampers Kabul Bank case

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“The major factor impeding the criminal investigation process is political interference resulting in reluctance to pursue charges against some of the participants of the Kabul Bank fraud,” the report says.

“Information received during the inquiry indicates that the final decision about who to indict was made at the political level in the spring of 2011 by a high-ranking committee — and that prosecutors from the attorney general’s office were called in to amend the indictment to conform to the decisions taken.”

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.

The report says $861 million, or 92 percent of Kabul Bank’s loan book, went to 19 individuals and companies. Among them are key bank shareholders, including Sherkhan Farnood, the former bank chairman and a world-class poker player; former chief executive officer Khalilullah Ferozi; Mahmoud Karzai, one of Karzai’s brothers; and Hassan Fahim, a brother of first Vice President Mohammad Qasim Fahim.

The former bank executives were charged, but the brothers of Karzai and Fahim were not named in the indictment.

The report describes Kabul Bank as a sophisticated operation with one set of books for the eyes of regulators and another in the back room that logged how those running the bank and others were fattening their wallets.

Loans were made but rarely repaid. Borrowers took out loans to pay back loans. Company documents and financial statements were fabricated. The bank’s credit department used more than 100 corporate stamps for fake companies to make documents look authentic. The bank operated some of its more than 100 branches without a permit from the government.

“Since 2006, the bank was running a pure Ponzi scheme,” Kos said.

The review was conducted to satisfy one of several benchmarks the International Monetary Fund asked the Afghan government to meet in cleaning up the scandal.

The report gives the Afghan central bank credit for carrying out various examinations of the bank, saying it tried to take enforcement measures or corrective actions four times after consistently spotting regulatory violations. But the committee said that unless the central bank and other Afghan institutions move to operate independently, stand up to political interference and hold wrongdoers accountable, the Afghan government will never be able to sustain a fully functioning democracy.

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Associated Press writer Rahim Faiez contributed to this report.

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

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