“Brother, can you spare a loan?”: Afghan Elites Rob the National Piggy Bank
Will Keola Thomas – Afghanistan Study Group
Another installment in the scandalous fleecing of the American (and Afghan) taxpayer from The New York Times:
“When a brother and a nephew of an Afghan vice president wanted to build up their fuel transport business, they took out a $19 million loan from Kabul Bank. When a brother of the president wanted to invest in a cement factory, he took out a $2.9 million loan; he also took out $6 million for a townhouse in Dubai. When the bank’s chief executive wanted to invest in newly built apartments in Kabul, he took almost $18 million.
The terms were hard to beat: no collateral, little to no interest. And no repayment due date.”
Must be nice. Back on the home front, small and medium businesses continue to struggle in a troubled economy as lending contracted for the 10th quarter in a row. The chairman of the Federal Deposit Insurance Corp., Sheila Bair, is practically begging banks to issue the loans that American businesses need in order to resume hiring. If only Chairman Bair was better connected in Kabul…
The enormous fraud perpetrated at Kabul Bank, Afghanistan’s largest and previously considered one of the most successful institutions in the country, was outlined in February in what remains a must-read investigation by Dexter Filkins for the New Yorker. Filkins found that $900 million of the bank’s deposits are presently lost or missing with little hope of the funds ever being recovered. A huge amount of this missing money came from the U.S. Embassy, which moved hundreds of millions of dollars through the bank in order to pay the salaries of Afghanistan’s government employees, soldiers, and policemen.
In many cases, the money disappeared into the accounts of fictional people and companies. In others, loans went to very real people who have no intention of repaying their debts. For example, “…Mahmoud Karzai, the president’s brother…has agreed to pay back only a sliver of some $18 million he borrowed without interest,” according to an investigation by Afghanistan’s Central Bank obtained by the New York Times. That’s far from the only connection to the U.S.’s “critical partner”, Hamid Karzai. The former C.E.O. of Kabul Bank told Filkins that the bank “gave” Pres. Karzai’s re-election campaign $4 million dollars, though there are no records of the transaction. Afghanistan’s political elite involved in this massive fraud were apparently aware of the benefits of the “private piggy bank” as financial institution: no paper trails.
The lack of documentation may mean that much of the money will never be recovered. However, what solid evidence of fraud exists should lead to prosecutions, no matter how powerful or connected the individual suspect may be. Unfortunately, it appears that up to this point Kabul Bank’s ties to the Karzai administration protected it from scrutiny while millions of dollars disappeared. Jean MacKenzie notes in The Global Post that Wikileaks cables revealed that US diplomats were aware of “most of the worst abuses” at the bank as early as 2009. Some fear that the Obama Administration won’t go after corruption at the highest levels of the Afghan government because, “We have to work with these people,” as a senior NATO officer told Dexter Filkins.
It is essential for corruption in the Afghan government to be investigated and prosecuted. Ending impunity in the looting of funds meant to improve the lives of ordinary Afghans is every bit as important for Afghanistan’s future stability as denying impunity to the war criminals who have made their way back into positions of power in the government. In both cases, the Afghan public is watching. The predatory behavior of their government, and complicit involvement of the foreign powers that allow such behavior to continue, will further undermine the legitimacy of that government which is so critical for the establishment of Afghan sovereignty and the long-awaited withdrawal of foreign troops.
