Afghan bank collapse was rooted in fraud, review finds
Independent report alleges wide conspiracy
SAROBI, Afghanistan — Afghanistan, already widely criticized for institutionalized corruption, appears to have reached new levels of officially sanctioned theft as fresh details emerged of a massive conspiracy to loot the privately owned Kabul Bank.
An independent review released Wednesday said hundreds of millions of dollars were embezzled in a sophisticated schemethat allegedly involved close associates of President Hamid Karzai, including his brother Mahmood, who has denied wrongdoing. Thereview described fraud driven by cronyism and nepotism, perpetrated by politically connected Afghans who stole the bank’s deposits and forced its collapse.
Thefraudwas abetted by weak oversight and a justice system perverted by political influence — “the perfect environment” for fraud, a report said.
“Kabul Bank was nothing but a fraud perpetuated against depositors, and ultimately all Afghans,” the report said.
The inquiry outlined in the report was conducted by an independent commission in Afghanistan made up of Afghan and international finance experts. It was financed by international donors.
Kabul Bank, which collapsed in 2010 and went into receivership in April 2011, was looted of $935 million in what the report said was one of the world’s largest bank failures, representing about 5 percent of Afghanistan’s gross domestic product.
Some of the hundreds of millions in looted cash was smuggled out of the country in airline food trays of the now-defunct Pamir Airways, according to the report. The airline was established through loans from Kabul Bank.
Authorities knew of the airline smuggling scheme in 2009 but did not pursue a serious investigation, the report said. The attorney general’s office within the Karzai government did not mount a credible investigation until April 2011— seven months after panicked customers stampeded branches to withdraw their money in response to reports of fraud.
Even then, the report said, “the final decision about who to indict was made at the political level.” Prosecutors were summoned by senior presidential aides and told to make the indictments “conform to decisions made,” the report said.
Basir Azizi, a spokesman for the attorney general’s office, told The Associated Press that the case was not treated as a political issue.
Ultimately, the bank had to be bailed out by Afghanistan’s central bank.
“This is the money from the budget of Afghanistan, from the pockets of the Afghan people,” Drago Kos, chairman of the Independent Joint Anti-Corruption Monitoring and Evaluation Committee, said at a Kabul news conference.