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Why is America Failing in Afghanistan?

- DR. Abdul-Qayum Mohmand

Analysis of “CIA World Factbook” (1981-2012): Dimensions of anti-Pashtun Conspirac

Afghan Fury at Planned Pakistan Pact
What Happens When the U.S. Leaves Afghanistan?
Trying to leave Afghanistan proves to be as troublesome as being there: A Closer Look
Afghanistan: “It’s Just Damage Limitation Now”
Zero Dark Thirty Review-Analysis; Eleven Instances of Disinformation
Why is America Failing in Afghanistan?
 
 
 
US forces in Afghanistan nearly destroyed vital airfield
We Are Those Two Afghan Children, Killed by NATO While Tending Their Cattle
Former Islamist Warlord Vies for Afghan Presidency
Pakistan releases top Afghan Taliban prisoner in effort to boost peace process
Losing the War in Afghanistan
Obama’s troop increase for Afghan war was misdirected
Afghan security vacuum feared along "gateway to Kabul"
Objections to U.S. Troops Intensify in Afghanistan
The Great Afghan corruption scam
War zone killing: Vets feel 'alone' in their guilt
Was Osama for Real? And Was He Killed in 2001?
Afghanistan withdrawal: The risks of retreat
The Real Reason the US Invaded Afghanistan
The Definition of a Quagmire
Huge Uncertainty' in Afghanistan
Controversial ID Cards Expose Ethnic Divisions In Afghanistan
Afghanistan: The Final Curtain Call for NATO?
Afghanistan After 9/11: A Mission Unaccomplished
Why Should Taliban and Other Insurgents Refrain from Negotiation With the US & NATO? By: Dr Mohammed Daud Miraki, MA, MA, Ph

Exclusive: Karzai family looks to extend boss rule in Afghanistan.

Intrigue in Karzai Family as an Afghan Era Closes
For Afghans, Two Outrages, Two Different Reactions
Double blow to west’s Afghan strategy
Does the Taliban need a diplomatic voice?
Afghanistan: Lessons in War and Peace-building for US
Afghan women opposed by former allies
Q+A - Haqqani: From White House guest to staunch U.S. enemy
Haqqanis: Growth of a militant network -BBC
Afghanistan shelves plans for ambassador accused of fraud
Afghan nominated as ambassador to Britain was accused in US of fraud
U.S. deal with Taliban breaks down
The Loneliness of the Afghan President: Karzai on His Own

NATO's Third Alternative in Afghanistan

On the Road: Interview with Commander Abdul Haq:- The Tragedy of Abdul Haq
When the Lion Roared: How Abdul Haq Almost Saved Afghanistan
AFGHAN WARRIOR: THE LIFE & DEATH OF ABDUL HAQ
Pakistan’s ISI: Undermining Afghan self-determination since 1948
Mineral Wealth of Afghanistan, Military Occupation, Corruption and the Rights of the Afghan People
M. Siddieq Noorzoy
Why Isn’t the UN Investigating and Prosecuting the U.S. and NATO for War Crimes Committed in Afghanistan?
Corruption and Warlordism:
Abdul Basir Stanikzai
In Afghanistan, U.S. contracts aren’t crystal balls, but they come close
The great Afghan carve-up
Anatomy of an Afghan war tragedy
Terry Jones Actually Burns a Qur’an and No One Notices
Q+A-Are Afghan forces ready to take over security?
Guantánamo Bay files rewrite the story of Osama bin Laden's Tora Bora escape
Winning Afghan hearts, minds with explosives
Afghanistan’s Mercenaries
KABUL’S HORIZONS
Who is winning Afghanistan war? U.S. officials increasingly disagree
Afghanistan: The Trouble With The Transition
From the Archives: In Quest of a ‘Greater Tajikistan’
The 1980s mujahideen, the Taliban and the shifting idea of jihad
Afghanistan's Karzai complains about interference
Karzai, US ambassador at odds over private security

Karzai Tells Washington Post U.S. Should Reduce Afghan Operation Intensity

Excerpts from Afghan President Hamid Karzai's interview with The Washington Post
What the Afghans Want
New US approach to Afghanistan insurgency: Vindication for Pakistan?
Putting Some Fight Into Our Friends
Afghans 'abused at secret prison
Why We Won’t Leave Afghanistan or Iraq
Indo-Pakistan proxy war heats up in Afghanistan
Canada’s elite commandos and the invasion of Afghanistan
U.S. retreat from Afghan valley marks recognition of blunder
Five myths about the war in Afghanistan
Marine who resigned over ‘conscience’ speaks at MU
The Afghan media may have grown since Taliban rule ended, but not so press freedoms
Mystery holes and angry ants: another Afghan day
Kabul Bank's Sherkhan Farnood feeds crony capitalism in Afghanistan
Marjah War
Operation Moshtarak: Which way the war in Afghanistan?
Q&A: Why Marjah, why now?
In Jalalabad, hope is fading
Seeking reconciliation, US units meet remote Afghanistan tribes
Once Again, Get the Hell Out! "Ending the War in Afghanistan"
Blackwater Kept a Prostitute on the Payroll in Afghanistan; Fraudulently Billed American Tax Payers
Wild West Motif Lightens US Mood at Afghan Bas
In southern Afghanistan, even the small gains get noticed
 Afghanistan war: US tries to undercut Taliban at tribal level
 Soviet lessons from Afghanistan
Are actions of 'super-tribe' an Afghan tipping point
Taliban: Terrorist or not? Not always easy to say
Q&A: Who else could help in Afghanistan?
Vietnam Replay on Afghan 'Defectors'
Washington's Refusal to Talk about Drone Strikes in Pakistan Meets Growing Opposition
Afghanistan summit: Why is the US backing talks with the Taliban?
Taliban's leadership council runs Afghan war from Pakistan
Why buy the Taliban?
2 Afghanistan conferences: No solutions
An Alternative to Endless War - Negotiating an Afghan Agreement?
Do the Taliban represent the Pashtuns?
Afghanistan asks ex-presidential contender to tackle corruption

Tehran Sets Conditions For Attending London Conference On Afghanista

Pakistan says reaches out to Afghan Taliban
Taking It to the Taliban
The Afghan Taliban's top leaders
How significant is Mullah Baradar's arrest?
Secret Joint Raid Captures Taliban’s Top Commander
What's the Quetta Shura Taliban and why does it matter?
What's behind latest Taliban attack on Kabul? See Images of the Attack By WSJ

Pakistan Version of Islam and Taliban ?????
Lahore fashion week takes on Talibanization in Pakistan

Loyalties of Those Killed in Afghan Raid Remain Unclear

After Attack, Afghans Question Motives or See Conspiracies
Gates: Taliban part of Afghan ‘political fabric’

IG: Afghan power-plant project ill-conceived, mismanaged

Taliban intensifies Afghan PR campaign

Taliban Overhaul Their Image in Bid to Win Allies
Karzai plans to woo Taliban with 'land, work and pensions'
Peace scheme mooted for Taliban
Bombs and baksheesh
But By All Means, Continue the Happy Talk on the Afghanistan War
Karzai Closing in on Taliban Reconciliation Plan
Last Exit Kabul
How To Get Out Without Forsaking Afghanistan's Stability
Afghan Recovery Report: Taleban Buying Guns From Former Warlords

'Jesus Guns': Two More Countries Rethink Using Weapons with Secret Bible References

Gun bible quotes 'inappropriate'
Text of Joint declaration of Afghanistan-Iran-Pakistan trilateral meeting
Garmsir Protest Shows Taleban Reach
Rugged North Waziristan harbors US enemies
The Arrogance of Empire, Detailed ( The Untold Story of Afghanistan )
Appointment of Afghan counter narcotics chief dismays British officials
In Afghanistan attack, CIA fell victim to series of miscalculations about informant
Rebuilding Afghanistan: Will government take hold in this post-Taliban town?
Rare bird discovered in Afghan mountains
Blackwater, now called Xe, in running for work in Afghanistan despite legal woes
How Soviet troops stormed Kabul palace
Afghan children 'die in fighting'
Afghanistan war: Russian vets look back on their experience
U.N. Officials Say American Offered Plan to Replace Karzai 
Learning From the Soviets
U.S. faults Afghan corruption body's independence
Intensify fight against corruption, says Afghan meeting
Afghan ministers cleared of charges
Drone aircraft in a stepped-up war in Afghanistan and Pakistan
U.S. Air Force Confirms 'Beast of Kandahar' Secret Stealth Drone Plane
Kissinger's fantasy is Obama's realit
Taliban shadow officials offer concrete alternative
Talking with the Taliban
20. Ashraf Ghani and Clare Lockhart
'Yes, there was torture and people were certainly beaten': Afghan warden
Why we should leave Afghanistan
US pours millions into anti-Taliban militias in Afghanistan
Pakistan to US: Don't surge in Afghanistan, talk to Taliban
A Plan C for Afghanistan
Finding decent cabinet is Karzai's big challenge
A way to get around Karzai in Afghanistan
Corruption fight boosted by 'Afghan FBI'
US demands Afghan 'bribery court'
Afghanistan plans court for corrupt ministers
The man leading Afghanistan's anti-corruption fight
Win hearts and minds in Afghanistan to win the war
Gates blocks abuse photos release
New U.S. Afghan prison unveiled, rights groups wary
War in Afghanistan: Not in our name
How the US Funds the Taliban
Afghan gov't says UN representative out of line
Cabinet of Warlords
Afghanistan and the lessons of history
Clinton says Karzai ‘must do better’
Recognizing the Limits of American Power in Afghanistan
After Afghanistan election, governors seek distance from 'illegal' Karzai
Karzai was hellbent on victory. Afghans will pay the price
Matthew Hoh: Please refute what I'm saying, we are stuck in the Afghan civil war
As US looks for exit in Afghanistan, China digs in
America's Top Diplomat Tells 'Nightline': 'Not Every Taliban Is al Qaeda'
Obama Can’t Make Russian Mistake in Afghanistan
10 Steps to Victory in Afghanistan
Will Obama change Afghan strategy?
Does the U.S. still have a vital interest in Afghanistan?
Pashtuns and Pakistani
The Afghan '80s are back
Pashtun peace prophet goes global
Afghan Road Builder's Dream Thwarted by Violence
A white elephant in Kabul
The Afghan Runoff: Will It Be a No-Show Election?

Ashraf Ghani- Afghanistan's Disputed Election Complicates U.S. Strategy

On Assignment: Into the Maw at Marja

Patrick Witty & Tyler Hicks
The New York Times


Afghanistan Cross Road CNN


The last frontier


Bruce Richardson
 

Articles

CIA: Buying peace in Afghanistan?

With Bags of Cash, C.I.A. Seeks Influence in Afghanistan
CIA Ghost Money: Karzai Confirms U.S. Gives Funds To Afghan National Security Team
What the CIA’s cash has bought for Afghanistan

Khalilzad: A Satan Whispering in the Hearts of Men
The Afghan trust deficitt
Will We Learn Anything from Afghanistan? Part 1
Getting Out of Afghanistan: Part 2
William R. Polk
General’s Defense on Afghan Scandal Ducks Key Evidence
Afghans want Taliban peace talks
Bombing Weddings in Afghanistan: It Couldn't Happen Here, It Does Happen There
Hekmatyar's never-ending Afghan war
Covert American Aid to the Afghan Resistance; A Top-Secret U.S. Foreign Policy Plot to Induce and Effect Soviet Military Intervention
Afghan brain drain fears as Karzai urges education reforms

US considers launching joint US-Afghan raids in Pakistan to hunt down militant groups

Real security in Afghanistan depends on people's basic needs being met
Intractable Afghan Graft Hampering U.S. Strategy
Former Taliban Officials Say U.S. Talks Started
Taliban ready for talks with US, not Karzai government
Emboldened Taliban Try to Sell Softer Image
Leaked NATO Report Shows Pakistan Support For Taliban
Insight: Few options for Afghan, U.S. leaders after Kandahar massacre
Presenter: Secretary of Defense Leon E. Panetta and Daoud Sultanzoy, Tolo Television
NATO’s measured exit plan in Afghanistan faces new obstacles
BFP Exclusive: Karzai Clan Attorney Threatens US Journalist, Uses Intimidation Tactics
Afghanistan Chronicles
Arduous path to Afghan 'end-game'
Fear in the classrooms: is the Taliban poisoning Afghanistan's schoolgirls?
A comment on the recent events of student poisoning in Afghanistan
Rape Case, in Public, Cites Abuse by Armed Groups in Afghanistan
Afghanistan’s Peace Talks Hit Brick Wall
THE ANATOMY OF US’S DEFEAT IN AFGHANISTAN
VOICES OF EMPIRE: FROM CIA’s CULTURAL GREAT GAME TO GLOBAL GREAT GAME TODAY
WHITE PAPER FOR THE PERMANENT PEACE IN AFGHANISTAN
King Karzai
A Federal System of Government is Not Suitable for Afghanistan
CHINA AMO DARYA OIL DEAL
Analysis: Where Afghan humanitarianism ends and development begins
U.S. Envoy: Kabulbank Was 'Vast Looting Scheme'
Speaking with the enemy: how US commanders fight the Taliban during the day and dine with them at night
Afghanistan: Operation Enduring Musery
How to Win Peace in Afghanistan
For Karzai, Stumbles On Road To Election
Cruel human toll of fight to win Afghan peace
Criticism of Afghan War Is on the Rise in Britain
Troops 'fighting for UK's future'
Operation in Taliban hotbed a test for revamped U.S. strategy
Covering Crucial Afghanistan Operation
Afghans still skeptical about Obama
US Defence Department struggling with public release of report on bombing in Afghanistan
Afghanistan on the Edge
Q+A: Who are the Pakistani Taliban insurgents?
Afghanistan Past & Present
Bombs for Pashtoons and Dollars for Punjab
Help! I'm being outgunned on K Street!
ANGELS CHASING DEMONS: “Jesus Killed Mohammad”!
U.S. tested 2 Afghan scenarios in war game
America's Top Diplomat Tells 'Nightline': 'Not Every Taliban Is al Qaeda'
Obama hearing range of views on Afghanistan
What Do Afghans Want? Withdrawal - But Not Too Fast - and A Negotiated Peace
Will Obama change Afghan strategy?
What Do Afghans Want? Withdrawal - But Not Too Fast - and A Negotiated Peace
Afghans tricked into U.S. trip, detained
In the Afghan War, Aim for the Middle
Obama pulled two ways in Afghanistan
Obama Can’t Make Russian Mistake in Afghanistan
10 Steps to Victory in Afghanistan
Gates: Mistake to set time line for Afghan withdrawal
Afghans question what democracy has done for them
High stakes in Afghan vote recount
Two Perspectives On Resolving The Afghan Postelection Crisis
Does the U.S. still have a vital interest in Afghanistan?
Pashtuns and Pakistanis
The Afghan '80s are back
How to Lose in Afghanistan
US in Afghanistan proposes revamped strategy
US 'needs fresh Afghan strategy'
US looks to Vietnam for Afghan tips
Lessons from Vietnam on Afghanistan
Afghan Pres. Skips Country's 1st TV Debate
A proud moment for Afghanistan
Rival to Karzai Gains Strength in Afghan Presidential Election
Afghan presidential candidate withdraws in Karzai's favor
America and international law
Hamid Karzai pulls out of historic TV debate just hours before broadcast
Karzai says no to first Afghanpresidential debate
Afghan election: Can Karzai's rivals close the gap?
Karzai opponents hope to beat him in second round
Afghanistan's Election Challenges
For Karzai, Stumbles On Road To Election
Pentagon Seeks to Overhaul Prisons in Afghanistan
Cruel human toll of fight to win Afghan peace
Karzai’s gimmick
Well-known traffickers set free ahead of election
US president sets Afghan target
U.S. Inaction Seen After Taliban P.O.W.’s Died
Why the Pentagon Axed Its Afghanistan Warlord
Earn our trust or go, Afghans tell GIs
The Irresistible Illusion
Running Out Of Options, Afghans Pay For an Exit
We've lost sight of our goal in Afghanistan
$2,000 for a dead Afghan Child, $100,000 for Any American Who Died Killing it
The strategy is sound – but success is not assured
Operation in Taliban hotbed a test for revamped U.S. strategy
Covering Crucial Afghanistan Operation
Pentagon Seeks to Overhaul Prisons in Afghanistan
Echoes of Vietnam
A Response To General Dostum
Obama orders probe of killings in Afghanistan
Obama admin: No grounds to probe Afghan war crimes
US president sets Afghan target
U.S. Inaction Seen After Taliban P.O.W.’s Died
Afghanistan's Election Challenges
The Irresistible Illusion
Earn our trust or go, Afghans tell GIs
Running Out Of Options, Afghans Pay For an Exit

We've lost sight of our goal in Afghanistan

The strategy is sound – but success is not assured
Stakes High in Afghanistan Ahead of August Elections
$2,000 for a dead Afghan Child, $100,000 for Any American Who Died Killing it
Ex-detainees allege Bagram abuse
Petraeus Is a Failure -- Why Do We Pretend He's Been a Success?
Fierce Battles and High Casualties on the Frontlines of Afghanistan
End the Illegal, Immoral and Wasted War in Afghanistan, says BNP Defence Spokesman
Outside View: Four revolutions
Pakistan's Plans for New Fight Stir Concern
France: liberty, equality, and fraternity – but no burqas
 

 

 

 

 

Echoes of Vietnam

Even the Coalition commanders in Afghanistan wonder if they can win the war
Will history repeat itself in Afghanistan?

British military intervention in Afghanistan has a chequered history, making it easy to conclude that British forces will fail again


 

Special Report


Afghan officials resist clean-up of Kabul Bank as scandal engulfs elite  
Source: Guardian By: Jon Boone  

President Hamid Karzai's brother calls for US to guarantee deposits amid fears collapse would threaten police and army salaries

Kabul -Officials in Afghanistan are resisting US pressure for a wide-ranging clean-up of Kabul Bank, which is mired in allegations of corruption which has engulfed some of the wealthiest and most powerful people in the country.

The stand-off came as the bank's third-biggest shareholder, Mahmoud Karzai – the elder brother of President Hamid Karzai – called for a US bailout of the stricken bank.

The Central Bank on Tuesday ordered that the chairman and chief executive of Kabul Bank, who are both large shareholders in the bank, should step down from their positions and a government official be appointed to manage the bank.

But western officials with intimate knowledge of the financial drama said the US treasury wants to see much stronger action. That would include bringing the bank into line with international norms, not least the appointment of a fully independent board capable of standing up to overmighty shareholders.

Such independence would risk bringing to light allegations that members of the country's business and political elite have, for years, apparently got away with using deposits of thousands of ordinary Afghans to fund lavish lifestyles. The bank's funds are said to have been used to invest in loss-making enterprises and, allegedly, the re-election campaign of President Karzai.

In the words of one foreign official, the US treasury is anxious to "rip the lid" off the cowboy capitalism that has been allowed to flourish at Kabul Bank.

But sources close to the negotiations say the Central Bank is under intense pressure to resist US demands.

"What [the US treasury is] asking for is not completely unreasonable, from a prudential regulatory perspective," said one official. "But there are lots of assets off the books. The hunch is that shareholders would like to continue to use bank assets how they want, rather than bring it into line with international best practice."

The central bank's spokesman could not be reached by phone today.

Earlier in the week Abdul Qadir Fitrat, the bank's governor, said the removal of Sher Khan Farnood as chairman and Khalilullah Frozi as chief executive had been a long-planned decision to bring to an end the situation where the two largest shareholders controlled all the operations.

But western officials and banking industry sources say the government was forced to clean up the bank's suspected dubious practices after infighting between the two men threatened the bank's future. The collapse of the institution that manages the salaries of the country's police and army would create havoc, as well as hitting the Afghan economy.

Mahmoud Karzai, a minority stakeholder with 7% of the shares, said he welcomed a full audit of the bank and that he was concerned about three problems that may have occurred under Farnood and Frozi: lending over the bank's limits, lending to shareholders and investing outside the country in "risky businesses".

When asked whether he thought anyone should go to jail if fraud is uncovered he said, "I don't think so because that would create chaos. Maybe there should be fines or something like that."

But he said he would never let the bank be taken over: "It's an independent bank owned by the shareholders and we will not allow the government or anyone else to take it over."

Karzai had earlier told the Boston Globe that "America should do something" and the US treasury should agree to guarantee the bank.

But when contacted by the Guardian he was anxious to sound a note of confidence, and said that with the bank's $400m in cash he did not think a bailout would be necessary. He said he only floated the idea of the US paying money because he held the American embassy and US newspapers responsible for starting the panic when they reported Kabul Bank had made $300m in losses, which he strongly denied.

But Karzai conceded that it had already suffered a bank run, with almost $160m withdrawn in the last two days alone – a huge amount considering Afghanistan's tiny banking sector. Despite efforts by Karzai and the finance minister to assure customers, the test will be whether the panic continues when banks open tomorrow. With so many of the bank's assets unlikely to be easily sold for cash a bailout could be huge, perhaps requiring $600m, in the estimate of one bank executive.

The financial scandal is a huge embarrassment for Afghanistan, with many leading figures linked to the unorthodox bank whose brazen business practices were allowed to flourish despite a modern banking law drawn up by foreign experts.

In a country that lacked any banking infrastructure in late 2001, the bank mushroomed into Afghanistan's largest financial institution by attracting depositors who had never had bank accounts before, allegedly in part by running a lottery system where account holders had the chance to win large prizes. Sources claimed those deposits were then used to fund enterprises belonging to shareholders or their families, while investors wanting to set up legitimate businesses often got nowhere.


Ex-bank executives say their dismissals caused panic withdrawals in Kabul
Source: Washington Post By: Ernesto Londono and Andrew Higgins  

KABUL - The two ousted executives of Afghanistan's largest bank have blamed a hasty management purge for a run on the embattled institution this week.

President Hamid Karzai ordered the dismissal of the managers at Kabul Bank this week after concerns about questionable loans that shareholders had approved for themselves, including some to fund the purchase of high-end real estate in Dubai.

Fearing a collapse, thousands of customers withdrew a total of $200 million Wednesday and Thursday, raising the possibility that the bank used to pay government workers could run out of cash as soon as next week.

Khalilullah Fruzi, the bank's former chief executive, said he warned Afghan officials that dismissing the top executives could create uncertainty among customers.

"I was saying, 'You have to be very cautious and careful about these changes,' " he said in an interview Friday. "This didn't take place, and when I resigned, people started panicking."

Late Friday, Karzai called Fruzi, ousted chairman Sherkhan Farnood, the governor of the Central Bank and other officials to a meeting at the presidential palace to discuss the crisis, said a person familiar with the matter.

Kabul Bank, which was closed Friday for the Islamic weekend, reopens Saturday. A renewed stampede by depositors would jeopardize its future.

The bank has about $300 million left in cash, Fruzi said. Afghan and U.S. officials worry that a collapse could undermine Afghans' confidence in a government the United States has spent billions shoring up.

"I don't see a good future for the bank," Fruzi said. "I hope our government can save us."

Farnood, in an interview late Thursday, also said the dismissals had left customers nervous.

"The big mistake was that they put pressure on me to resign," said Farnood, who set up the bank in 2004. "The people all believed in me."

Fruzi acknowledged that the bank's loan system wasn't perfect, but he argued that that was to be expected "in a country like Afghanistan," where personal relationships carry more weight than "being a professional in the field."

Farnood and Fruzi, who are also among the banks' top shareholders, helped themselves to loans for real estate ventures - which both men defended as solid investments.

Farnood used about $160 million from the bank's coffers in 2007 to buy 16 seafront properties and two towers under construction in Dubai, where the real estate market has fluctuated wildly in recent years.

Fruzi said he took $5 million earlier this year to build a large low-income housing complex on the outskirts of Kabul.

The loans came to the government's attention in recent weeks after Farnood opened the bank's books to U.S. Embassy officials in Kabul, Fruzi said. He added that he and Farnood disagreed about whether the bank should be steering its investment capital to Dubai, as the chairman favored, or keeping a greater share in Afghanistan.

Fruzi, Farnood and fellow bank shareholder Mahmoud Karzai, a brother of the Afghan president, have been occupying three of the Dubai villas rent-free. Other residents at the Palm Jumeirah villas are politically connected Afghans. The properties are registered to Farnood and his wife - not the bank.

Afghan government officials said this week that the bank remains solvent and encouraged customers to keep their money there. They played down the management shake-up, saying it was routine to comply with new rules barring bank shareholders from executive roles at banks. They also blamed foreign reporters for sensationalizing the case.

Fruzi, who said he has no regrets over the way the bank was managed, said he worries that the episode could trigger violence.

"The money that has been withdrawn hasn't gone to other banks," he said. "They just take it home. That will create more instability, more killings, more robberies."

Fruzi said he fears for his life. On Friday morning, he said, an angry customer showed up at his residence in Kabul demanding his money back.

"They are threatening me to death," he said. "I'm really worried about it."


Karzai moves to assure Afghan depositors
Source: GlobalPost By: Jean MacKenzie  

KABUL, Afghanistan - President Hamid Karzai has tried to reassure his worried countrymen that their deposits in the troubled Kabul Bank are safe, blaming any panic on the Western media.

“The Western press is … printing out our decisions in a negative way and in a provocative way,” he told a press conference Thursday evening. “It’s sad to hear that. It’s unfortunate.”

Kabul Bank, one of the country’s largest, is in deep trouble. With just over $1 billion in assets, according to its latest audited statement from 2009, it has more than $990 million in liabilities. It is also facing potential losses of close to $300 million, according to government officials.

The central bank, known as Da Afghanistan Bank, stepped in on Tuesday to try and bring some order out of the deepening chaos, removing the bank’s chairman, Sherkhan Farnood, as well as its chief executive officer, Khalilullah Ferozi. Both men were major stakeholders in the bank, each holding slightly more than 28 percent of the stock. Third on the list was Mahmoud Karzai, brother of the Afghan president, Hamid Karzai, who held 7 percent.

Amid allegations of mismanagement and corruption, bank officials insisted that the removals were part of a normal reform of the banking industry, according to which major stakeholders could no longer serve as bank officials.

Masoud Ghazi, a former official at the central bank, was installed as CEO, but the post of chairman remains empty.

Karzai late on Thursday did not deny that Kabul Bank had its difficulties, but insisted that the government was able to control the situation.

“We deemed it necessary to take action immediately [in the case of Kabul Bank],” he said. “But Kabul Bank is safe. People don’t have to panic … The government of Afghanistan is fully behind that bank.”

But his remarks are unlikely to quell the growing fears among his countrymen, hundreds of whom were lined up in the hot sun outside the main branch of Kabul Bank on Thursday, patiently waiting their turn. Inside, the crush was almost suffocating – there was barely room to push between the crowds desperately trying, first to get a number, then to be served.

There was little panic in the air, more a grim determination to get their money as soon as possible and get away from what many see as a tainted organization.

“We do not trust this bank any more,” said a young man who identified himself as a researcher at a local think tank. “The government is corrupt, and that corruption is spreading.”

Some lucky few could be seen walking away with bags filled to the brim with dollars and afghani, the local currency. One man in a grey suit had wrapped both of his arms around his precious package, while beside him a uniformed bodyguard swaggered.

Much more casual was a young man in the characteristic Afghan pirohon-tunbon, loose pants topped by a buttoned tunic. He had no bodyguard, just a large, heavy-looking, yellow plastic bag, which he placed nonchalantly on the sidewalk as he spoke.

“I work for a USAID project,” he explained, referring to the U.S. Agency for International Development, which runs multi-million dollar programs inside the country. “Our bosses told us to take all of our money out of Kabul Bank. The bank gave me everything I asked for.”

He had been there since early morning, he explained.

Aini, 22, said he had arrived at 10 a.m. and had already been waiting for an hour and a half. “I am Number 688,” he said wryly. “It will be at least another two hours before I can get money.”

But the bank closed its doors at 2 p.m. because of the Ramadan fast. Many customers will walk away unsatisfied.

Kabul Bank’s problems were most likely due to the same close political connections that had ensured its success.

Protected by high-ranking connections, and spreading money freely among the political elite, Kabul Bank engaged in practices that soon landed it in hot water.

According to numerous reports, Farnood used bank funds to purchase up to $160 million in property on Dubai’s lavish Palm Jumeirah, an artificial island on the Persian Gulf built in the shape of a palm tree and catering to the super-rich.

Mahmoud Karzai had been living in a seaside villa belonging to Kabul Bank for about a year and a half. He told Al Jazeera television on Tuesday that he did not own any of the properties, but had been renting his villa from Farnood. He promised that he would relinquish the property and seek another address.

But the bottom dropped out of Dubai’s property market two years ago, making Farnood’s villas a liability rather than an asset. Once he signs over the deeds to the Kabul Bank, as he has promised to do, the financial institution is likely to find itself facing a hefty loss.

Other loans made to powerful people exceeded legal limits or were unsecured, according to Afghan officials.

And the bank was renowned for oiling the political machines of those close to the center of power. Kabul Bank reportedly bankrolled Karzai’s presidential campaign last year, and has, by all accounts, been spreading the wealth among this year’s crop of pro-government parliamentary candidates.

“There is a distinct linkage between business and politics,” said Haroon Mir, head of the Afghanistan Center for Research and Policy Studies. He was speaking just hours before the scandal broke. “We all know that Kabul Bank is bribing ministers. But no one goes after Kabul Bank. Instead they go after the politicians.”

That may no longer be so. The State Department has expressed confidence that the government’s actions in the case are a sign of the president’s determination to fight corruption.

But the central bank has been at some pains to downplay the scandal, hoping to avert wholesale panic. With more than $975 million on the books in customers’ deposits, a run on the ban could force it to close its doors.

“The bank is solvent,” said Abdul Qadir Fitrat, governor of the central bank, at a press conference on Wednesday. “The bank has enough liquid assets to meet its liquidity demands.”

That was not enough to calm all of the population.

In volatile Helmand province, where the news of the crisis sparked a major run on the small branch, a uniformed guard had to hold off angry depositors at gunpoint.

Farhod Ahmad, a soldier with the Afghan national Army 5th battalion, who has been stationed in Helmand for six months, said he would withdraw whatever he could once he managed to get inside.

“I am going to put it in my jacket bank,” he laughed, patting his pocket.”

Even in the more cosmopolitan Kabul, the crisis could do serious and long-term damage to the Afghan banking industry. Many of those waiting to withdraw their money on Thursday said they would not put it back in any other bank.

“I don’t trust any Afghan bank,” said a young woman in black, wearing braces on her teeth. She gave her name as Mutahar. “I will take all of my money out, and I won’t go near any bank associated with this government.”

Others said they would put their cash in one of the foreign banks operating in Afghanistan, such as Alfalah, owned by the Abu Dhabi Group.

But the government assurances were more than enough for some.

“Nobody is really worried,” said one burly, mustached man who said his name was Mahmoud. “The money in Kabul Bank is guaranteed by the central bank. It was just a switch of directors.” He then added, confidently if erroneously,” My money is insured by the central government.”

The central bank does not, in fact, insure individual deposits. It is unlikely, however, that Da Afghanistan Bank would let Kabul Bank go under, since it uses the institution to pay its teachers, police, and soldiers.

Karzai emphasized this in his press conference Thursday evening: “The Ministry of Finance today, I believe, released … between $100 [million] and $150 million … from the bank to handle the payments and the salaries of our government employees,” he said.

Denying salaries to men with guns is not a winning policy in any country.

“Depositors are not going stand around drinking lattes and waiting for their money,” laughed Najib, a young scholar who has recently returned from a year in the United States. “These guys have Kalashnikovs.”


Kabul Bank run may pose more immediate threat than Afghan Taliban
Source: The Christian Science Monitor By: David Montero  

The Kabul Bank is a bedrock for a stable Afghan society. Its collapse could spell disaster for the country already battling a resurgent Afghan Taliban.

Even as it battles a resurgent and spreading Taliban, the beleaguered government of Afghan President Hamid Karzai is facing a more immediate threat: a run on the country’s largest banks.

This week, droves of depositors rushed offices of Afghanistan’s Kabul Bank, pulling out their money amid concerns that bank has lost millions of dollars. BBC News broadcast images of Hummers and SUV’s racing to the bank, a troubling sign of growing mistrust for Mr. Karzai’s already heavily criticized government.

By today, nearly $200 million in investor deposits were withdrawn, leaving the bank with only $300 million in cash, reported The Washington Post. While high, that amount in withdrawals was a more conservative estimate than the $300 million reported Wednesday by The New York Times and The Wall Street Journal.

In the aftermath, Afghanistan’s fledgling economy could be severely disrupted. On Friday, both Karzai and one of his six brothers, Mahmoud Karzai, a shareholder in the Kabul Bank, urged calm while simultaneously appealing to the United States to head off an economic collapse, reported The Washington Post.

In February, the Post ran a series of articles alleging deep-rooted corruption within Kabul Bank, the country’s largest. According to the Post, the Kabul Bank purchased over $150 million worth of luxury villas in Dubai and other properties for well-connected members of Karzai’s government. There were also reports of crippling feuds among the bank’s major shareholders.

On August 31, the Central Bank of Afghanistan moved to take control of Kabul Bank, demanding that the bank forfeit $160 million worth of assets. Following the seizures, two top officials of the Kabul Bank resigned. One of the men who resigned, Sherkhan Farnood, is a world class poker player.

The fallout from Kabul Bank's problems could extend beyond the economy. The Post reported Thursday that "an unchecked run on Kabul Bank, which could spread alarm to other banks, would jeopardize not only depositors' savings but President Obama's Afghan strategy, which is built around efforts to rally the public against the Taliban."

American officials, security analysts, and Afghan businessmen also see it as a security threat. The US hopes a growing Afghan economy will lift living standards, undercut support for the Taliban, and increase confidence in Mr. Karzai. And the Kabul bank particularly plays a central role: it houses $1.3 billion in deposits from ordinary citizens, and also handles payments for teachers, soldiers, and police – the bedrock of a stable Afghan society.

The Post reported today:

The collapse of the bank would probably spread panic throughout the country's fledgling financial sector and wipe out nine years of effort by the United States to establish a sound Afghan banking system, seen as essential to the establishment of a functioning economy. This would give a big boost to a mostly unregulated "hawala" system, a network of informal money exchanges that, in addition to serving ordinary customers, also provides a secure and opaque channel through which drug traffickers and terrorists are believed to move their funds.

... Afghan businessmen and others, however, said that should Kabul Bank fall, the consequences would be catastrophic for both the economy and security of Afghanistan.

“If this goes on, we won’t survive,” Khalilullah Frozi, one of the two largest shareholders of Kabul Bank, told The New York Times. “If people lose trust in the banks, there will be a revolution in the financial system.”

The Times continued:

Most Afghans do not keep their money in the banking system, and Kabul Bank is tiny by international standards. But creating a credible and stable banking system is an important goal of the American-led effort in the country, which is seeking to help Afghanistan develop a modern economy.

Secretary of Defense Robert Gates, during a visit to Afghanistan on Thursday, struck a note of assurance, insisting that the Kabul Bank is operating normally. At his side, President Karzai urged calm and pledged to guarantee all deposits at Kabul Bank.

“The Kabul Bank is safe,” Karzai said, according to The Financial Times. “The government of Afghanistan is fully behind the bank ... We have got at least $4.8 billion in cash; even if the whole financial system in Afghanistan collapses we still have the money to support it.”

Outside of the press conference, however, panicked depositors formed long queues at Kabul Bank branches throughout the country, nearly every branch a staging ground of outrage against the government.


Karzai Kin Asks U.S. to Bolster His Bank
Source: The Wall Street Journal By: MATTHEW ROSENBERG And MARIA ABI-HABIB  

KABUL—A top shareholder in Afghanistan's largest bank called on the U.S. to shore up the lender after depositors withdrew about a third of its cash reserves in two days, while the country sought to avert a destabilizing crisis at a crucial moment in the fight against the Taliban.

Mahmood Karzai, brother of Afghanistan's president and the third-largest shareholder in Kabul Bank, urged the U.S. to calm the situation, saying the lender could keep up with the pace of withdrawals for only a few more days.

"America could support Kabul Bank to the last penny, of course that would help," he said in an interview at his Kabul home. "The full faith and credit of the U.S. government behind Kabul Bank—what more do you want?"

The U.S. said it has no plans to prop up Kabul Bank and has only sent in a small team of experts to help the Afghan central bank sort out the mess.

"While we are providing technical assistance to the Afghan government, we are taking no steps to bail out Kabul Bank," said White House spokesman Robert Gibbs.

On Thursday, crowds of depositors gathered at Kabul Bank's branches to try to withdraw their cash.

If the withdrawals continue apace, Mr. Karzai said, the bank would be effectively insolvent by early next week. The bank has $1.3 billion in deposits, and its total assets are almost equal to its liabilities. But the lender only had $500 million in cash on hand at the start of the crisis, he said. Its other assets—including Dubai real estate investments of uncertain value—aren't easily convertible into cash.

Mr. Karzai's numbers were confirmed by a senior central bank official.

Kabul Bank's woes became public late Tuesday when word emerged that Afghanistan's central bank had quietly forced out the bank's two top executives, and its biggest shareholders, amid allegations that they made hundreds of millions of dollars in often-clandestine loans to themselves and Afghan government insiders.

U.S. and Afghan officials say they hope that even the worst-case scenario—Kabul Bank's collapse—would have a limited economic impact. Afghanistan's economy is largely cash-based and the vast majority of financial transactions are conducted through informal money-transfer firms, none of which are thought to be in peril. Formal banks account for only a tiny sliver of Afghanistan's financial activity.

Yet among those banks, Kabul Bank fills a special role: Hundreds of thousands of soldiers, teachers and police are paid through the bank, and many of the government's own accounts are kept there. President Hamid Karzai said Thursday that paychecks continued to go out through the bank.

Kabul Bank's woes pose a threat to Afghanistan's nine other private banks, potentially foiling years of American-backed efforts to build from scratch the kind of banking system seen as essential to a healthy economy.

Kabul Bank has close ties to the administration of President Hamid Karzai, and the allegations of insider dealing at the bank thus pose a double challenge for the U.S. Restoring the credibility of the corruption-riddled Karzai administration is a pillar of the U.S. strategy here.

Many Afghans said they saw the activities at Kabul Bank as another sign of government-sanctioned, Western-backed avarice.

"It comes down to the weak government. They issue licenses to people to open banks to use as their own personal accounts," said one Kabul Bank customer, who gave his name as Mohammed. He had been waiting for hours in a packed Kabul Bank branch to collect the $3,000 in his account and had yet to reach a teller.

President Karzai, appearing Thursday at a news conference with U.S. Defense Secretary Robert Gates, repeated pledges by other officials to guarantee deposits at Kabul Bank.

The lender "is safe, people do not have to panic. The government of Afghanistan is fully behind that bank," he said. "Even if the whole financial situation in Afghanistan collapses, we have the money to support it, so people do not have to be worried."

The lender's $1.3 billion in deposits represent more than a quarter of the $4.8 billion that President Hamid Karzai said Thursday Afghanistan holds in hard currency reserves.

Some U.S. officials expressed doubt that the Afghan government could bear the strain of propping up Kabul Bank without outside help. The government took in less than $1 billion in revenue last year and relies on the U.S. and other donors for much of its budget.

If Kabul Bank were to run short of money, the cash for depositors "may well come from the coffers of U.S. taxpayers and other international donors," said one U.S. official.

U.S. and Afghan officials said the need for U.S. help would be even more pressing if Afghans begin to lose confidence in other banks—which doesn't yet appear to be happening.

Working in Kabul Bank's favor was the arrival of the Afghan weekend on Friday, when banks, like most shops and offices, are closed. Mahmood Karzai said he hoped cooler heads would prevail after the banks reopened Saturday.

At a separate news conference, Finance Minister Omar Zakhilwal blamed the bank's troubles on alarmist reports in the foreign media. He told reporters it would "never collapse." The large volume of withdrawals were "not a crisis," he said.

Yet Mahmood Karzai's account of the bank's financial situation painted a darker picture.

He said depositors have withdrawn about $177 million from the lender—about a third of its available cash—in the two days since Afghan regulators forced out its two top executives and placed a central bank official in charge.

On Thursday, two Afghan soldiers waited to transfer their $200 salaries from the bank to their families in Baghlan province, in the north. Despite the chaotic crowd and no real lines, the soldiers took a number and were still waiting to be called by one of the branch's 15 tellers two hours later.

"There are so many people, they are all worried the bank will collapse," said another customer, Adisha Mahmoud, the owner of an Afghan construction company. Dressed in a light blue shirt and a pin-striped vest,Mr. Mahmoud had been waiting for an hour, trying to withdraw the $40,000 he has on deposit at the bank.

—Julian Barnes and Habib Totakhil contributed to this article.
Write to Matthew Rosenberg at matthew.rosenberg@wsj.com


Too Corrupt to Fail?
Source: The New Yorker By: Amy Davidson  

Who owns Kabul Bank? And where has its money gone?

Last night, after Obama had finished his speech about how we were sort of almost done in Iraq but still had a lot of lives to lose and money to spend in Afghanistan the Washington Post put a story on its Web site about how the Afghan Central Bank was moving to replace the management of Kabul Bank. This is the bank that handles the payroll for Afghan soldiers and schoolteachers. From the Post:

Kabul Bank’s wayward lending practices, real estate speculation in Dubai and weeks of venomous feuding between major shareholders have threatened to wreak economic and political havoc.

U.S. officials have long worried that Kabul Bank, because of its size and unorthodox practices, could trigger financial mayhem, a prospect that would leave Afghan security forces without pay, threaten unrest by angry—and often armed—depositors and undermine President Obama’s Afghan strategy.

Our war in Afghanistan may be compromised by a bank? And, again, whose bank—who are the major shareholders involved in “venomous feuding?” The Post includes a helpful chart; they all seem to have ties to Karzai, his election campaign, and his cabinet. One is his brother, Mahmoud Karzai. He is in a better position to come out of this well than the depositors who were heading to the bank to get their money out this morning; there is a fair amount of confusion at the moment about who’s in control, what the central bank’s role will be, and, most of all, where all the money has gone. (Some seems to have funded an airline owned by the chairman of the bank.) Are American taxpayers going to end up bailing this bank out, because it’s so entwined with the Karzai government that it’s considered crucial to the war effort? Is there such a thing as a bank that’s too corrupt to fail?

The Wall Street Journal, in a follow-up, described “a massive portfolio of off-the-books loans by the bank’s chairman to himself and to other politically connected Afghans.” The bank has also, according to the Journal, used hawala, a less-than-regulated money-exchange system, “to clandestinely transfer almost $1 billion out of Afghanistan in the past few years.” It was mixed up with New Ansari, a firm that, as the Journal put it, “allegedly helped Afghan politicians, drug barons and even the Taliban move billions of dollars out of the country.” (Karzai recently intervened to get one of his aides, who was accused of taking a bribe to stop an investigation of Al Ansari, out of jail.) The Times said that Kabul Bank and its chairman, Sherkhan Farnood, were “at the heart of the political and economic nexus that sustains—and is sustained by—the government of President Hamid Karzai” and “provided millions to Mr. Karzai’s campaign.” Then there are its business dealings:

First among the beneficiaries was Mr. Farnood himself, the officials said. He invested about $140 million of the bank’s money in the real estate market in Dubai in the United Arab Emirates, said Mahmoud Karzai, the president’s brother and a Kabul Bank shareholder. Among those properties were more than a dozen multimillion-dollar villas in Mr. Farnood’s name, some of them on Palm Jumeria, an island off Dubai’s coast, Mr. Karzai said.

A lot of that value was lost when the Dubai real-estate market fell (assuming, of course, that the transactions were real). More from the Times:

It is not clear what Mr. Farnood did with all the properties he purchased, but he made at least some of them available to his friends and allies. One of them was Mahmoud Karzai, who owns about 7 percent of the bank. Speaking in an interview from Dubai, Mr. Karzai said he had rented one of Mr. Farnood’s villas for the past year and a half.

Mr. Karzai said the bank’s troubles—and Mr. Farnood’s opaque dealings—had made him decide to vacate soon.

“I want to move to a different house,” Mr. Karzai said. “I want to cut this out.”

So President Karzai’s brother has been living in a villa in the Emirates that constitutes a questionable investment by the bank he partially owns; but he might move. The Wall Street Journal said that a U.S. official had tried to make the case that the removal of bank officials was “a sign” that Karzai was getting a little bit serious about corruption. But, the Journal noted,

An Afghan banker with knowledge of the situation offered a less optimistic view, saying the move may have more to do with shifting political and business alliances among the country’s small, clubby elite.

Mahmood Karzai, for example, has recently forged stronger links with the owners of Afghan United Bank, a competitor of Kabul Bank. Afghan United Bank’s chairman owns a 20% stake in a housing development that Mahmood Karzai is building outside the southern city of Kandahar, where U.S. forces are making a major push against the Taliban.

So what is Mahmoud Karzai's new preferred bank like?

Afghan United Bank is owned by the founders of New Ansari, the hawala that is being investigated. U.S. officials say the bank’s owners still control the hawala, although the bank’s owners say they have cut ties to the money-transfer business.

Moving the money from one bank to another, or the President’s dubiously wealthy brother moving himself from one villa to another, doesn’t really count as doing something about corruption. Or, if it does, then we have a long way to go in Afghanistan. It’s a bit like moving soldiers from one war to another, and calling it victory.


Kabul Bank braces for run on deposits after doubts  
Source: Associated Press By: Deb Riechmann And Rahim Faiez  

KABUL, Afghanistan – Managers of Afghanistan's largest bank braced for a run on deposits Thursday, a day after nervous customers showed up in droves to take out their money following the resignation of two top executives allegations of mismanagement and unorthodox lending practices.

Crowds outside Kabul Bank's main branch in the center of the Afghan capital were larger than normal ahead of opening, although there seemed to be little panic.

Afghan officials have sought to reassure the public, and Afghan television stations broadcast remarks Wednesday night from central bank governor Abdul Qadir Fitrat insisting that Kabul Bank was solvent and had enough liquidity to meet demands.

Problems at the bank could have wide-ranging political repercussions since it handles the pay for Afghan teachers, soldiers and police in this unstable, impoverished nation beset by the stubborn Taliban insurgency and widespread drug trafficking and plundering of aid money.

The bank's woes also tie into the web of corruption and personal connections that has soured many Afghans on their government: President Hamid Karzai's brother, Mahmood Karzai, is the bank's third largest shareholder with 7 percent.

The New York Times and The Wall Street Journal reported Wednesday that Kabul Bank's losses could exceed $300 million — and that the figure is more than the bank's assets. The Washington Post reported that the central bank had ordered the newly resigned chairman to hand over $160 million in real estate holdings in Dubai purchased for relatives and friends of the political elite.

At his news conference Wednesday, Fitrat refused to address the allegations and tried to dissuade customers from withdrawing their money. He said the top two executives of Kabul Bank had resigned as part of reforms being implemented by the central bank to improve professionalism at some of Afghanistan's 10 private banks.

"The central bank will stand fully behind Kabul Bank. Failure of Kabul Bank is not an option," Fitrat said to shore up confidence in the bank. "I hope that the situation will be stabilized by tomorrow or the day after."

While the Afghan government has no formal system to insure bank deposits, Fitrat said the central bank has funds to help the bank stay solvent.

Customer Masuda Sultan of Kabul said that when she arrived at the bank about 9:30 a.m. a crowd had already formed around the "VIP" area where customers go if they want to withdraw $10,000 or more. At first, bank employees told her they could not complete her transaction.

"They said they had to get it out of the central bank," said Sultan, who was then steered to an upstairs office where bank employees tried to convince her to keep her money in the institution.

"They said `We don't have it right now,'" said Sultan, who was told to return in the afternoon when the bank honored her withdrawal.

Mohammed Azimi, a businessman in the northern city of Mazar-i-Sharif, said he tried to withdraw $50,000 or $60,000, but the bank would only let him withdraw $5,000.

"They wouldn't give me the money," Azimi said. "They said they would give me the money tomorrow."

Sherkhan Farnood, former chairman of Kabul Bank, and Khalilullah Ferozi, former chief executive officer, voluntarily resigned because, under new reforms, only banking professionals can hold the top operating positions at banks, Fitrat said. He said the bank is being run by Masood Ghazi, a former official at the central bank. Fitrat said top executives at other banks will be resigning, too, to conform with the reforms.

Farnood, a world class poker player, and Ferozi each own 28 percent of the bank's shares.

Two months ago, the central bank told Afghan banks that it was going to start requiring banking professionals to hold top management positions.

"Kabul Bank initiated this change for itself," Fitrat said. "The central bank has not taken over Kabul Bank, and it was purely a Kabul Bank decision, which was approved by the central bank. Of course, we welcome this decision. This is a positive move."

Fitrat would not confirm whether the central bank was probing the bank's lending practices.

"We will always investigate any irregularities in any bank whenever we receive reports," he said.

Baryalay Khan, a car dealer in north Kabul, said Wednesday that he learned about the bank's problems at midday, but couldn't get to the bank before it closed.

"I am very concerned because I have $30,000 to $40,000 in the Kabul Bank," Khan said. "I'm not sure this bank is trustworthy. "My plan is to go to the bank tomorrow and move my money to another bank. It's still very confusing."

Kandi Shah, a carpet dealer in Kabul, said he was at a funeral when he heard about the bank and couldn't leave to make a withdrawal.

"Everybody was so trusting of this bank, but suddenly they have lost $300 million?" said Shah, who also said he planned to go to the bank on Thursday and empty all 85,000 euros ($108,870) from his account and deposit it in another bank. "Kabul's security is not good enough to keep it at the house."

Asif Khan, manager of a hotel in the southern city of Kandahar, got a heads-up about the bank's problems on Tuesday. A relative who works at Kabul Bank advised him to withdraw his money that day because it might not be possible to gain access to it after that.

Khan said he tried to withdraw about $900 on Tuesday, but the cashier only allowed him to take out about $560.

"They said `There are too many withdrawals today and we have a shortage of money,'" said Asif Khan, who on Wednesday withdrew another $290.

However, Habib Raza, a former Kabul Bank employee who runs an electronics shop in Kandahar, said the bank honored his entire $4,482 withdrawal on Wednesday.

"I wish and I pray that the problem can be solved," said Raza, who left a little money in his account.

The U.S. welcomed the central bank's decision to "confront the mismanagement of Kabul Bank," U.S. State Department spokesman P.J. Crowley said Tuesday.

"The individuals suspected of illegitimate activities have been replaced and the Afghan government is taking the necessary steps to strengthen the bank and protect its depositors," he said.

"The situation presents a unique opportunity for the Afghan government to take a strong stand against corruption. We fully expect President Karzai to back the central bank's efforts and any law enforcement actions that follow to hold those responsible for illicit activity accountable."

Maj. Joel Harper, a spokesman for the international military coalition in Kabul, issued a statement, saying: "This is an action we believe is being addressed competently by the governor of the central bank and the president of Afghanistan."


Worried Afghans withdraw Kabul Bank deposits  
Source: Washington Post By: David Nakamuraand Andrew Higgins  

KABUL - With Afghans clamoring to pull their cash from their nation's biggest bank, the United States risks a politically perilous decision: whether to step in to help shore up a wobbly bank critical not only to Afghanistan's economy but also to the battle against the Taliban.

A swarm of customers at the headquarters of Kabul Bank in the Afghan capital on Wednesday raised the prospect of a full-scale bank run that would further alienate dispirited Afghans from their government and imperil American efforts to contain the insurgency.

On Thursday morning, scores of Afghans again flooded the Kabul Bank offices to withdraw their savings. The scene was crowded but orderly. At one branch, where government employees were trying to cash their paychecks, the bank staff declared a limit of $1,000 per customer.

Later in the day, the Ministry of Finance issued a statement declaring that all government employees would be able to cash their checks from Kabul Bank, which the ministry called "a reliable bank."

Still the uncertainty was taking its toll. One source with knowledge of Kabul Bank's books said depositors had withdrawn $90 million on Wednesday and far more than that Thursday. Afghan President Hamid Karzai had scheduled a news conference for 5 p.m. Thursday at the presidential palace, though the subject of the conference was not disclosed by aides.

Haji Rafi, head of rival Afghan United Bank, said his bank had prepared for a potential run on its own assets by account holders but added that there was not much change in activity Thursday. Asked if he was concerned that a potential collapse of Kabul Bank would harm Afghanistan's nascent banking industry, Rafi said: "I'm not worried because the Central Bank already assured us they are behind the bank."

The tumult in Kabul suggested that a decision by the Central Bank to purge the management of Kabul Bank and rein in its freewheeling ways - which included disastrous property speculation in Dubai - could backfire and set off the very crisis officials hoped to avoid. Karzai's brother Mahmoud, who used to run an Afghan restaurant in Maryland, owns 7 percent of Kabul Bank.

Afghan officials, struggling to prevent panic, insisted Wednesday that Kabul Bank and its rivals, some of which are perhaps even more fragile, are not in danger of collapse.

David Cohen, the Treasury Department's assistant secretary for terrorist financing, praised the Central Bank's leaders for acting "aggressively, decisively and as a bank regulator should act under the circumstances." He said the Treasury Department is "confident" that the Central Bank "has the expertise to handle the situation with Kabul Bank."

Treasury has assigned a small team of experts to work with the Central Bank on the matter.

A senior U.S. official, who spoke on the condition of anonymity because of the sensitivity of the issue, played down the wider consequences that could result should Afghanistan's banking sector implode, noting that only about 5 percent of Afghans have bank accounts. But Kabul Bank, which has taken in $1.3 billion in deposits, plays a pivotal political as well as economic role: It handles salary payments for soldiers, police officers and teachers.

"The teachers will come with their books, but the soldiers have Kalashnikovs," warned a prominent Afghan businessman who spoke on the condition of anonymity.

An unchecked run on Kabul Bank, which could spread alarm to other banks, would jeopardize not only depositors' savings but President Obama's Afghan strategy, which is built around efforts to rally the public against the Taliban. But any move by the U.S. government to help shore up Afghan banks probably would stir fierce opposition in the United States, where the use of taxpayers' money to bail out Wall Street after the 2008 financial crisis still rankles many.

Most members of the crowd at Kabul Bank on Wednesday appeared to be businessmen, some with international operations. They wanted to withdraw large sums to pay employees and protect their assets.

Shareholders said Kabul Bank has $500 million in liquid assets, a substantial cushion. But one major shareholder familiar with the matter reported problems accessing this cash, much of which is stashed with the Central Bank.

The U.S. government has spent millions of dollars on contractors, Treasury Department advisers and computers for Afghanistan's Central Bank in an effort to fortify feeble supervision of a financial sector rooted in the fast-and-loose practices of the "hawala" money exchanges. Sherkhan Farnood, Kabul Bank's founder and ousted chairman, got his start by running a successful but corner-cutting hawala network, with branches in Russia, Dubai, Afghanistan and elsewhere.

Speaking Wednesday from his villa in Dubai, which was paid for by Kabul Bank, Mahmoud Karzai, the president's brother, said cash withdrawals from the bank were a "little bit more than usual" but did not threaten to cause a meltdown. A full-scale run on Kabul Bank, he added, "would be a major disaster."

A big concern is that Kabul Bank, which has issued large and sometimes hidden loans to its own shareholders and well-connected insiders, won't get its money back. The bank also has spent about $160 million on villas at the Palm Jumeirah island resort and other real estate in Dubai, where prices have since collapsed. Nearly all these properties are registered in the names of Farnood and his wife, not the bank's. Farnood has said he will hand over the titles.

Central Bank Governor Abdul Qadir Fitrat called a news conference Wednesday as rumors spread across the capital and beyond. "The bank is solvent," he said while flanked by Farnood, a boisterous world-class poker player, and Masood Ghazi, Kabul Bank's new acting chief executive. Until he took the Kabul Bank post, Ghazi worked as a senior official at the Central Bank.

"Kabul Bank is one of the most important banks of Afghanistan, and the Central Bank and the Afghan government will by no means let Kabul Bank be affected," Fitrat said.

Shortly after noon Wednesday, Zabi Pacha, 27, who owns a construction company that does business with the U.S. military, said he had been waiting more than four hours to withdraw the $100,000 in his account. When he arrived, he found a line outside the bank. Pacha said he was given a number and told to wait. An armored car arrived about 9:30 a.m., he said. But as the minutes ticked by, he grew nervous that the branch might be out of cash.

"I will transfer to another bank and another account somewhere else," Pacha said. "I'm scared. That's a big amount of money. I cannot keep my money here."

Hasib, 26, a civil engineer, was also waiting to transfer his money and close his account. He had rushed to the bank after a friend called to tell him about the media reports of the Central Bank's intervention, which was first reported by The Washington Post.

Hasib did not know many details, but said: "I'm nervous and I hope to get my money soon. It's a big concern for us. Nobody is telling the truth here. We only heard that the bank is corrupted. We don't need to go deeper in detail about what happened. I'm concerned about my money."

Fitrat, the Central Bank governor, said the ouster of Kabul Bank's top officials was a routine affair aimed at bringing the bank in line with new regulations, which bar shareholders from taking any management role. He said this was not a government "takeover" but an effort to professionalize the bank.

Shareholders described a more dramatic sequence of events. The Central Bank's intervention followed weeks of acrimonious feuding between senior Kabul Bank executives for control of the bank, along with revelations of off-the-book loans, often to shareholders, including the brother of Vice President Mohammed Fahim. Such loans were cut into small packets to skirt legal lending limits.

The Central Bank stepped in Monday on orders from President Karzai. Karzai had previously hesitated to take robust action against Kabul Bank, which supported his fraud-tainted reelection campaign last year. People familiar with the matter said the president had repeatedly urged Mahmoud, his brother, to disentangle himself from the bank.

Mahmoud declined, saying he wanted to help build a modern financial sector.

One senior Afghan official, who spoke on the condition of anonymity, said that he had hoped for the best but that "the worst is happening."

nakamurad@washpost.com higginsandrew@washpost.com

Higgins reported from Dubai. Correspondent Joshua Partlow in Dubai and special correspondent Masood Azraq in Kabul contributed to this report.


Afghanistan Official Tries to Ease Depositors’ Worries About Troubled Bank  
Source: The New York Times By: DEXTER FILKINS  

KABUL, Afghanistan — Afghanistan’s top bank official tried Wednesday to calm fears of a meltdown at one of the country’s largest financial institutions, while scores of Afghans lined up to empty their accounts and found the bank reluctant to comply.

The official, Abdul Qadir Fitrat, held a news conference to say that Kabul Bank was more stable than was suggested by the huge financial losses revealed this week. Mr. Fitrat, the chairman of Afghanistan’s Central Bank, urged Afghans to keep faith in the country’s financial system — and to keep their money in Kabul Bank.

“The bank is solvent, the bank is solvent,” Mr. Fitrat said. “Kabul Bank has no cash problem.”

“Kabul Bank would never have cash problems,” he added, “God willing.”

On Thursday, the Finance Ministry issued a statement assuring government employees that they would continue to be able to deposit and withdraw their salaries at Kabul Bank. The statement added that the replacement of top executives would improve management and services and was “part of the life cycle of a business,” The Associated Press reported.

Earlier this week, Kabul Bank, at the behest of the country’s Central Bank, changed its leadership after the discovery of losses approaching $300 million, an amount far exceeding its capital. The revelations prompted fears among American and Afghan officials of a stampede of withdrawals that could set off of a collapse of confidence in Afghanistan’s financial system.

In a measure of just how seriously officials regarded the bank’s troubles, the Central Bank installed its chief financial officer as the new head of the bank.

The other measure of the troubles could be seen Wednesday at the news conference, in the faces of the two Kabul Bank executives who had just resigned. Sherkhan Farnood, the former chairman, and Khalilullah Frozi, the former chief executive, flanked Mr. Fitrat, looking haggard, ashen and unkempt.

Mr. Fitrat, for all his efforts, failed to address some of the larger questions surrounding Kabul Bank, one of the country’s largest private financial institutions. He did not mention the $300 million in losses — compared with just $120 million in assets. Mr. Fitrat promised that the Central Bank would stand behind Kabul Bank “with all its means and power,” but he did not guarantee the depositors’ money.

Finally, Mr. Fitrat did not explain how Kabul Bank got into such trouble in the first place. Mr. Farnood, its former chairman and largest shareholder, appears to have run the bank as much for his own personal gain as to make loans to Afghans, investigators said. He borrowed at least $140 million to buy property in the United Arab Emirates for himself, shareholders say. And he lent $100 million to one of the bank’s other shareholders, Hameed Fahim, the son of Afghanistan’s first vice president.

In addition, Mr. Farnood cultivated a close relationship to President Hamid Karzai, bankrolling his re-election campaign last year.

In the absence of a thorough explanation, many Afghans appeared to disregard Mr. Fitrat’s pleas. By Wednesday morning, the lobby of Kabul Bank was filled with people coming to take out their money. Many of them were told they could not — that the bank did not have any money to give them. Rumors swept through the crowd that Kabul Bank had lost not $300 million, which was bad enough, but $1 billon.

“I have been waiting here since 8 a.m., and they keep telling me, ‘We do not have money, come back tomorrow,’ ” said Wahidullah, the owner of a construction company who came to cash a $50,000 check, and who like many Afghans uses only one name. He had gone to two other Kabul Bank officers and received the same answer, he said.

“There are many people inside the bank, and most of them are worried about losing their money,” he said.

Mr. Wahidullah was not alone in his difficulties. Still, it was unclear exactly why he and other Afghans like him were not able to withdraw any money from Kabul Bank. The new chief executive, Masoud Ghazi, declined Wednesday to answer questions.

The next few days are considered crucial by Afghan and American officials. Worries among depositors could spread, or they could subside.

Sharifullah Sahak and Sangar Rahimi contributed reporting.


Karzai: Afghan Govt Will Back Kabul Bank  
Source: The Associated Press By: DEB RIECHMANN  

Afghan President Karzai says govt will guarantee deposits at troubled Kabul Bank

KABUL, Afghanistan - Afghan President Hamid Karzai reassured nervous customers at the troubled Kabul Bank on Thursday, saying every penny of their deposits would be guaranteed by the government.

Larger than usual crowds gathered to withdraw funds from Afghanistan's largest bank Wednesday and Thursday after two top executives resigned amid allegations of mismanagement and unorthodox real estate loans.

"The Kabul Bank is safe," Karzai said in a news conference with visiting U.S. Defense Secretary Robert Gates.

Afghan Finance Minister Omar Zakhilwal echoed that message, saying that fears about the stability of Kabul Bank had not sparked a "crisis" at Kabul Bank.

"We are 100 percent sure that Kabul Bank is safe," Zakhilwal said. "I, as finance minister, am giving you my guarantee that your money is safe  if it's one Afghani, one dollar, one euro, up to millions. ... Kabul Bank is not in danger."

Afghan television stations broadcast remarks Wednesday night from the central bank governor, Abdul Qadir Fitrat, who insisted that Kabul Bank was solvent and had enough liquidity to meet demands. On Thursday, the Afghanistan Banks Association issued a statement of support for the bank, and Zakhilwal sought to reassure customers that their deposits were safe.

"The government of Afghanistan guarantees that every penny that they have deposited will be paid back to them if they request it," he said. "But what we are requesting of the Afghan people is not to rush because rush is not good for them, and it's not good for the banking system. We guarantee the money."

Some customers went anyway.

Nazifa Amiri, who works for a foreign aid agency in Kabul, said problems with the bank would have an especially devastating effect on poor Afghans like herself.

"I need this money to feed my children, plus we have the festival coming up," said Amiri, referring to next week's celebration of the end of the Muslim holy month of Ramadan.

Amiri successfully drew her monthly salary of $390 from the bank's branch in Kabul's Wazir Akbar Khan neighborhood. However, Defense Ministry employee Mohammad Zami said he had been rebuffed when attempting to withdraw dollars from his account at the same branch, with managers saying more currency was on its way.

"I don't have a lot of money in it, but this is supposed to be a trustworthy bank to serve the Afghan people. It's not good to see it tied up in politics," Zami said.

A branch manager, who declined to give his name because staff had been ordered not to speak to media, said dollar stocks ran out about one hour after opening, although supplies of Afghan currency were sufficient to meet demand.

Shah Masood Azha, a businessman in the southern city of Kandahar, said residents remained worried about the safety of their accounts.

"This is a result of poor oversight, and the government needs to have many more checks and balances," Azha said.

Problems at the bank could have wide-ranging political repercussions since it handles the pay for Afghan teachers, soldiers and police in this unstable, impoverished nation beset by the stubborn Taliban insurgency, widespread drug trafficking and plundering of aid money.

The Finance Ministry issued a statement assuring government employees that they would continue to be able to deposit and withdraw their salaries at Kabul Bank. The statement added that the replacement of top executives would improve management and services and was "part of the life cycle of a business."

The bank's woes also tie into the web of corruption and personal connections that has soured many Afghans on their government.

Gen. David Petraeus, top commander of U.S. and NATO forces in Afghanistan, was asked about Kabul Bank's woes at a round-table with reporters on Thursday.

"I'm not really the guy in the financial sector here in Afghanistan but financial issues can have security issues and therefore we keep an eye on them," Petraeus said. "In this case our assessment is that the governor of the central bank has taken prudent measures. He has announced what it is that he has been doing to reassure depositors ... Our sense is that he and the minister of finance have taken a very prudent course," that should reassure depositors. "I think this will be OK."

A U.S. official, speaking on condition of anonymity because he was not authorized to speak to the media, said that while the United States was providing technical assistance to the Afghan government, it was taking no steps to recapitalize Kabul Bank.

Sherkhan Farnood, former chairman of Kabul Bank, and Khalilullah Ferozi, former chief executive officer, resigned because, under new reforms, only banking professionals can hold the top operating positions at banks. The bank is being run by Masood Ghazi, a former official at the central bank. The bank said top executives at some of Afghanistan's other 16 private banks might have to step aside as well to conform with the reforms.

Farnood, a world class poker player, and Ferozi each own 28 percent of the bank's shares. President Hamid Karzai's brother, Mahmood Karzai, is the bank's third largest shareholder with 7 percent.

The New York Times and The Wall Street Journal reported Wednesday that Kabul Bank's losses could exceed $300 million  and that the figure is more than the bank's assets. The Washington Post reported that the central bank had ordered the newly resigned chairman to hand over $160 million in real estate holdings in Dubai purchased for relatives and friends of the political elite.

Zakhilwal challenged claims that the bank was on a shaky foundation. Kabul Bank has more than $1 billion in deposits. He said the property pledged as collateral for loans at the bank is "way more  in fact twice as much  as the loans that they have given out."


Karzai's brother calls for U.S. to shore up Kabul Bank as withdrawals accelerate  
Source: The Washington Post By: Andrew Higgins and Ernesto Londoño  

DUBAI - As depositors thronged branches of Afghanistan's biggest bank, Mahmoud Karzai, the brother of the Afghan president and a major shareholder in beleaguered Kabul Bank called on Thursday for intervention by the United States to head off a financial meltdown.

"America should do something," said Karzai in a telephone interview, suggesting that the U.S. Treasury Department guarantee the funds of Kabul Bank's clients, who number about a million and have more than a billion dollars on deposits with the bank.

Kabul Bank handles salary payments for soldiers, police and teachers. It has scores of branches across Afghanistan and holds the accounts of key Afghan government agencies. The collapse of the bank would likely spread panic throughout the country's fledgling financial sector and wipe out nine years of effort by the United States to establish a sound Afghan banking system, seen as essential to the establishment of a functioning economy.

Action by the United States, said Mahmoud Karzai, would prevent a run on Kabul Bank and protect other banks, too. He said Kabul Bank is "stable and has money" but cannot withstand a stampede by panicked depositors.

"If the Treasury Department will guarantee that everyone will get their money, maybe that will work," said Karzai, who holds 7 percent of the bank's shares, making him the third-biggest shareholder. Karzai, who spends most of his time in Dubai - where he lives in a waterfront villa paid for by Kabul Bank - rushed to Kabul on Wednesday to join efforts to salvage the bank.

Treasury officials have said they have confidence in Afghanistan's Central Bank, which ousted Kabul Bank's top officials earlier this week and has sought to stabilize the bank's finances.

But those moves may have spurred a panic: Depositors, said people familiar with the situation, yanked at least $90 million from Kabul Bank on Wednesday and the hemorrhaging of funds accelerated Thursday.

"Yesterday was not too bad, but today is worse," said a Kabul Bank insider. "It is a very bad situation."

At a press conference in Kabul on Thursday, Finance Minister Omar Zakhilwal played down concerns about the bank's future, blaming foreign media for stirring alarm. "Kabul Bank will never collapse," Zakhilwal said. "It will remain strong. The government will support Kabul Bank."

The finance minister acknowledged that fearful customers have flocked to Kabul Bank branches over the past two days to try to withdraw their savings. Withdrawals, he said, were "more than usual" but "it's not a crisis."

The Afghan government, he added, will "give back every last penny. People should not bother getting in line to withdraw their money." Banks had shorter than usual hours Thursday because of Ramadan, the Islamic holy month, and Friday is a holiday, which will give authorities some respite and could help calm public alarm.

The finance ministry issued a statement Thursday assuring all government employees they would be able to cash their paychecks at Kabul Bank. The Afghan Banks Association issued its own statement of support for Kabul Bank.

Earlier Thursday, throngs of customers swarmed tellers at Kabul Bank's main branch in central Kabul. Shafiq Javed, 38, said he decided to withdraw $900 of the $2,000 he had in savings. "We used to trust them," he said, referring to bank managers. "Since this revelation, everybody is concerned."

At a nearby branch where many government workers cash their paychecks, tellers were giving out no more than $1,000 to each customer. Zaburzay, 40, a surgeon who works at a government hospital, said he gave up on trying to withdraw his money because the branch was too crowded and tellers were only giving out $20 notes.

"All these people are thieves and we don't trust them," he said. "Whether or not it collapses, I want to take my money out."

The U.S. Treasury Department has assigned a small team of experts to work with the Afghan Central Bank on the Kabul Bank mess, but it has so far given no hint of any readiness to step in more robustly. In an interview Wednesday, Treasury's Assistant Secretary for Terrorist Financing, David Cohen, said the United States has "confidence" in the Afghan Central Bank's ability to handle the situation and praised it for acting "aggressively, decisively."

The fierce storm now hammering Afghan banking broke late Tuesday following news - first reported on the Web site of The Washington Post - that Afghanistan's Central Bank had removed Kabul Bank's two top executives - who are also its biggest shareholders - and installed one of its own senior officials as chief executive.

The Central Bank has since presented its intervention as a routine affair aimed at bringing Kabul Bank into line with new regulations that bar shareholders from management.

But bank insiders give a more dramatic account of events. The Central Bank's move on Kabul Bank followed weeks of volatile feuding between Sherkhan Farnood, the bank's now ousted chairman, and Khalilullah Fruzi, its purged chief executive, as well as mounting concern over large and likely illegal loans to the bank's own shareholders and other well-connected insiders.

Finance Minister Zakhilwal said Thursday that Kabul Bank's lending was not excessive or particularly risky and amounted to a total of roughly $300 million. But it was not clear whether this figure included roughly $160 million that former Kabul Bank chairman Farnood sunk into real estate in Dubai, where prices have slumped, or other off-the-book transactions.

U.S. officials are hoping that because only 5 percent or fewer Afghans hold bank accounts and most of the economy revolves around cash, the fallout from the Kabul Bank crisis can be contained. Afghan businessmen and others, however, said that should Kabul Bank fall, the consequences would be catastrophic for both the economy and security of Afghanistan.

Before the crisis began, Kabul Bank had taken in about $1.3 billion in deposits and boasted liquid assets of $500 million, a substantial cushion that, in ordinary circumstances, would allow it to meet depositors' demands for cash. But the rush to withdraw money over the past two days has forced the bank to impose limits on withdrawals at some branches and strained the Central Bank's ability to release the cash it holds for Kabul Bank.


Long queues form at Afghan bank amid graft charges  
Source: AFP By:    

An owner of Afghanistan’s biggest bank, Kabul Bank, said yesterday it was not facing a run and was supplying branches with enough cash to meet demand, a day after US media allegations of corruption.
“There is not a run. We’re here and we are prepared to pay out as much as the depositors want to withdraw from their accounts,” Khalilullah Ferozi, Kabul Bank’s former chief executive officer, said.
“Of course we had problems but we’re absolutely fine now,” he said.
Ferozi spoke as long queues formed at branches of Kabul Bank in cities across Afghanistan, with customers anxious about reports in major US newspapers that the bank was facing liquidity problems.
Ferozi is a major shareholder in the bank, along with a brother of President Hamid Karzai and others connected to senior government officials.
US newspapers reported on Wednesday that the central bank had replaced the bank’s two top executives — Ferozi and chairman Sher Khan Farnud — and ordered Farnud to hand over 160mn dollars’ worth of luxury property purchased in Dubai for himself and for cronies.
However, central bank chief Abdul Qadir Fitrat said on Wednesday that the pair had not been forced from office but had resigned after the introduction of new rules forbidding shareholders from holding senior positions.
“The central bank, the government of Afghanistan, is standing behind Kabul Bank and will never allow it to collapse,” Fitrat told a news conference.
“Kabul Bank has no liquidity problems. Right now the Kabul Bank is functioning all over the country. Kabul Bank will never have liquidity problems in the future, inshallah (God willing),” he said.
Ferozi said that anxious customers had withdrawn $80mn on Wednesday. By midday yesterday, customers had withdrawn 12mn dollars and deposited around $4mn, he said.
“Kabul Bank is well prepared to meet the demands of depositors who want to withdraw their money. We had some cash problems in the branches but we have supplied enough,” he said.
“The problem with cash supply arose because we had supplied the branches according to normal circumstances.”
Despite the official assurances, customers flooded branches of Kabul Bank in major cities, including Kabul, were hundreds of people gathered in the main banking chamber of the head office in the hope of withdrawing their funds.
Long queues also formed at branches in the commercial city of Mazar-i-Sharif in the north, in Herat in the east, and the southern city of Kandahar, AFP correspondents said.
While some demand for cash could be attributed to the upcoming Eid holiday, which begins next week following a month of Ramadan, many of the people queuing said they were concerned about the bank’s solvency.
As the ticket machine for those queuing at the bank’s head office in Kabul issued its 900th ticket, a 23-year-old man who asked not to be named said: “I want all my money. I want to withdraw all my money.”
Asked why he wanted to withdraw his funds after authorities had guaranteed deposits, he said: “I don’t trust them. I’m sure it has problems.”
“The bank is finished,” said another depositor with the bank. “The government can make assurances, but the problem is that no one here trusts the government.”
In Mazar-I-Sharif, a teller at the main Kabul Bank branch said depositors had withdrawn around $26mn yesterday, and the bank had taken four deliveries of cash.


Karzai Says Afghanistan Government Has Assets to Stem Crisis at Kabul Bank  
Source: BLOOMBERG By: Eltaf Najafizada and Rebecca Christie  

Afghan President Hamid Karzai said his government can provide any needed support to the country’s largest commercial bank, hours after customers crowded its branches to withdraw deposits.

Karzai repeated his aides’ reassurances tonight, saying Kabul Bank customers should stay calm because the central bank has $4.8 billion on hand, “enough liquid assets to support any bank” in Afghanistan. He spoke to reporters a day after the central bank said the lender’s top executives were replaced amid U.S. news reports that it had lost millions of dollars.

Despite the assurances from government officials, hundreds of depositors gathered outside Kabul Bank’s glass-walled headquarters in the Shahr-e-Nau district of the capital. “I was shocked to hear the news about the bank,” said Haji Tamim Sohraby, 24, who owns a construction company. “I have $15,000 deposited and now they are telling me they are out of money, and I was able to take only $1,000.”

The bank’s chairman and chief executive quit last week to comply with rules against shareholders holding those positions, the central bank governor said yesterday. He denied a Washington Post report that Kabul Bank is in trouble because of millions of dollars in unrecorded loans to allies of Karzai and after it spent more than $160 million on Dubai villas, including for Karzai’s brother Mahmoud.

U.S. Advisers

The U.S. Treasury Department has sent additional technical advisers to help the Afghan government deal with the bank’s problems, said a U.S. official in Washington, speaking on condition he not be named.

While Kabul Bank provides key services for the U.S.-backed war against Taliban guerrillas, including the processing of salary payments for Afghan troops and police, the U.S. is taking no steps to provide financial support for the bank, the official said.

Earlier in the day, depositors rushed to Kabul Bank branches in Afghanistan’s biggest cities outside Kabul, according to residents reached by phone in Kandahar, Mazar-e- Sharif and Herat. Customers at Mazar-e-Sharif, in the north, were having trouble withdrawing more than $1,000 each, said Ali Ahmad Nawabi, a teacher at Baba Mazari High School.

Da Afghanistan Bank Governor Abdul Qadeer Fitrat yesterday said the bank is solvent, without detailing what conditions led to the appointment of his chief financial officer, Masood Musa Ghazi, as the commercial bank’s new CEO. Fitrat has acted appropriately in response to the bank’s troubles, the U.S. official in Washington said.

“If Kabul Bank were to collapse, Afghanistan would face a financial crisis,” said Ahmad Masood, an economics professor at Kabul University.

Corruption Investigations

U.S. President Barack Obama has pressed Karzai to reduce corruption. Graft is a major cause of dissatisfaction with the government as it battles Taliban insurgents, according to the independent research group Integrity Watch Afghanistan. Karzai has said the main source of corruption is uncontrolled aid money spent by international donors.

A top Afghan prosecutor, Deputy Attorney General Fazl Ahmed Faqiryar, last week said Karzai’s administration fired him after blocking corruption investigations against top Karzai aides. Karzai’s spokesman denied the accusation.

Kabul Bank removed Khalilullah Frozi as CEO in compliance with the central bank order issued two months ago, and chairman Sherkhan Farnood resigned, Fitrat said yesterday. Each man owns about 28 percent of the bank’s shares, according to the Kabul Bank website. Phone calls made to the bank’s headquarters yesterday seeking interviews with the two men were unsuccessful.

A Feb. 22 article by the Washington Post cited land records in Dubai and bank officials saying that the bank had lent millions of dollars to relatives of President Karzai and some of his key political allies, with some of the money going to buy luxury homes in the Gulf emirate. The Post quoted Farnood as saying in an interview that he was listed as the owner of villas in Dubai where Mahmoud Karzai and other political figures were living.


Afghan central bank insists Kabul Bank is solvent  
Source: Associated Press By: DEB RIECHMANN and RAHIM FAIEZ
 

Trying to reassure nervous account holders, Afghanistan's central bank said it will stand behind the nation's largest bank after its two top executives resigned amid allegations of mismanagement and unorthodox lending practices.

Customers showed up in droves at Kabul Bank branches Wednesday and banking officials braced for a run on the bank Thursday as word of the bank's troubles spread across the country, which is impoverished yet awash in money from corruption, drug trafficking and international aid contracts.

"The bank is solvent," Abdul Qadir Fitrat, governor of the central bank, told reporters at a hastily called news conference to rebut news reports that the bank is deeply in the red. "The bank has enough liquid assets to meet its liquidity demands."

The New York Times and The Wall Street Journal reported Wednesday that Kabul Bank's losses could exceed $300 million - and that that figure is more than the bank's assets. The Washington Post reported that the central bank had ordered the newly resigned chairman to hand over $160 million in real estate holdings in Dubai purchased for relatives and friends of the political elite.

Fitrat refused to address the allegations and tried to dissuade customers from withdrawing their money. He said the top two executives of Kabul Bank had resigned as part of reforms being implemented by the central bank to improve professionalism at some of Afghanistan's 10 private banks.

"The central bank will stand fully behind Kabul Bank. Failure of Kabul Bank is not an option," Fitrat said to shore up confidence in the bank. "I hope that the situation will be stabilized by tomorrow or the day after."

While the Afghan government has no formal system to insure bank deposits, Fitrat said the central bank has funds to help the bank stay solvent.

Customer Masuda Sultan of Kabul said that when she arrived at the bank about 9:30 a.m. a crowd had already formed around the "VIP" area where customers go if they want to withdraw $10,000 or more. At first, bank employees told her they could not complete her transaction.

"They said they had to get it out of the central bank," said Sultan, who was then steered to an upstairs office where bank employees tried to convince her to keep her money in the institution.

"They said `We don't have it right now,'" said Sultan, who was told to return in the afternoon when the bank honored her withdrawal.

Mohammed Azimi, a businessman in the northern city of Mazar-i-Sharif, said he tried to withdraw $50,000 or $60,000, but the bank would only let him withdraw $5,000.

"They wouldn't give me the money," Azimi said. "They said they would give me the money tomorrow."

Kabul Bank, which opened in 2004, has 68 branch offices spread over all 34 provinces in Afghanistan. It handles the pay for Afghan teachers, soldiers and police.

Sherkhan Farnood, former chairman of Kabul Bank, and Khalilullah Ferozi, former chief executive officer, voluntarily resigned because, under new reforms, only banking professionals can hold the top operating positions at banks, Fitrat said. He said the bank is being run by Masood Ghazi, a former official at the central bank. Fitrat said top executives at other banks will be resigning, too, to conform with the reforms.

Farnood, a world class poker player, and Ferozi each own 28 percent of the bank's shares. President Hamid Karzai's brother, Mahmood Karzai, is the third largest shareholder with 7 percent.

Two months ago, the central bank told Afghan banks that it was going to start requiring banking professionals to hold top management positions.

"Kabul Bank initiated this change for itself," Fitrat said. "The central bank has not taken over Kabul Bank, and it was purely a Kabul Bank decision, which was approved by the central bank. Of course, we welcome this decision. This is a positive move."

Fitrat would not confirm whether the central bank was probing the bank's lending practices.

"We will always investigate any irregularities in any bank whenever we receive reports," he said.

Baryalay Khan, a car dealer in north Kabul, said Wednesday that he learned about the bank's problems at midday, but couldn't get to the bank before it closed.

"I am very concerned because I have $30,000 to $40,000 in the Kabul Bank," Khan said. "I'm not sure this bank is trustworthy. "My plan is to go to the bank tomorrow and move my money to another bank. It's still very confusing."

Kandi Shah, a carpet dealer in Kabul, said he was at a funeral when he heard about the bank and couldn't leave to make a withdrawal.

"Everybody was so trusting of this bank, but suddenly they have lost $300 million?" said Shah, who also said he planned to go to the bank on Thursday and empty all 85,000 euros ($108,870) from his account and deposit it in another bank. "Kabul's security is not good enough to keep it at the house."

Asif Khan, manager of a hotel in the southern city of Kandahar, got a heads-up about the bank's problems on Tuesday. A relative who works at Kabul Bank advised him to withdraw his money that day because it might not be possible to gain access to it after that.

Khan said he tried to withdraw about $900 on Tuesday, but the cashier only allowed him to take out about $560.

"They said `There are too many withdrawals today and we have a shortage of money,'" said Asif Khan, who on Wednesday withdrew another $290.

However, Habib Raza, a former Kabul Bank employee who runs an electronics shop in Kandahar, said the bank honored his entire $4,482 withdrawal on Wednesday.

"I wish and I pray that the problem can be solved," said Raza, who left a little money in his account.

The U.S. welcomed the central bank's decision to "confront the mismanagement of Kabul Bank," U.S. State Department spokesman P.J. Crowley said Tuesday.

"The individuals suspected of illegitimate activities have been replaced and the Afghan government is taking the necessary steps to strengthen the bank and protect its depositors," he said.

"The situation presents a unique opportunity for the Afghan government to take a strong stand against corruption. We fully expect President Karzai to back the central bank's efforts and any law enforcement actions that follow to hold those responsible for illicit activity accountable."

Maj. Joel Harper, a spokesman for the international military coalition in Kabul, issued a statement, saying: "This is an action we believe is being addressed competently by the governor of the central bank and the president of Afghanistan."


Afghan bankers quit amid graft charges
Source: Reuters By:    

KABUL: Afghanistan’s Central Bank yesterday said the directors of one of the country’s top private banks had resigned to meet new regulations but denied it had taken over the bank following media allegations of corruption.

Central Bank Governor Abdul Qadir Fitrat said the chairman and chief executive officer (CEO) of Kabulbank had stepped down this week because of new banking rules forbidding shareholders from holding senior management positions at a bank.

Former Kabulbank Chairman Sherkhan Farnood and former CEO Khalilullah Fruzi each own a 28 percent share of the bank, according to the bank’s website.

A spokesman for Kabulbank, which is part-owned by a brother of President Hamid Karzai, said the men still owned their shares.

The Washington Post reported on Tuesday that the Central Bank had taken control of Kabulbank, forcing its top two managers to resign and ordering the chairman to hand over $160 million worth of luxury villas purchased in Dubai with bank funds. Corruption in Afghanistan is one of the most common complaints from ordinary Afghans and the Obama administration fears widespread graft is boosting the Taliban-led insurgency and complicating efforts to strengthen central government control so US and other foreign troops can begin withdrawing. Fitrat denied the Central Bank had stepped in.

“Unfortunately, some of the media reported baseless information and rumours that Kabulbank came under the control of the Central Bank. We do not have control over Kabulbank,” he told reporters at a news conference in the Afghan capital. Fitrat said the Central Bank had drawn up new regulations two months earlier making it illegal for bank shareholders to hold senior management positions.

“The aim of the Central Bank is to appoint highly-qualified people in the banks, so that decision was taken two months ago and was transmitted to banks, and Kabulbank initiated this change by itself,” said Fitrat.


Afghan ambassador to US to leave post, slams smears
Source: ANP/AFP By:    

Afghan ambassador to the United States, Said Jawad, said Wednesday he had been ordered to leave his post after seven years, and lashed out at what he called a "broad campaign smear" against him.

He told CNN that seven years in the ambassador post was a "long time" and it was "fairly normal" for him to be leaving at this point.

But Jawad also said he was not given an explanation for why he had to leave, and had been told to quit by September 22.

"Serving seven years to strengthen the bond of friendship between our two nations has been a tremendous honor and a most rewarding experience," Jawad said in a statement posted on the website of the Afghan embassy in Washington.

In an interview with CNN however, Jawad slammed what he described as "completely false allegations and doctored photos" that had appeared to show lavish parties held at the embassy during the holy month of Ramadan.

The pictures purportedly showed women in sleeveless dresses and drinking alcohol at the embassy. But Jawad said he had been out of the country in Colombia and Brazil.

And he charged that people were being "subjected to a broad campaign smear both by the opportunistic government, and those fanatics outside of the government, and so they use this information and misinformation and propaganda in different ways."

Jawad insisted he would not comment on the forced surprised resignations of Afghanistan's interior minister and secret service chief in the last few months at the hands of President Hamad Karzai.

The two officials were among the most respected members -- at home and among Afghanistan's Western allies -- of Karzai's US-backed government, which has been plagued by allegations of corruption.

The pair had reportedly had serious reservations about Karzai's approach to brokering peace talks with the Taliban insurgency.

Karzai's office said in early June that the president lost confidence in them over their handling of security at a "peace jirga" held in Kabul, which was targeted in an insurgent attack.


Corruption Allegations Surround Kabul Bank
Source: NPR By: ROBERT SIEGEL  

Kabul Bank is the biggest private bank in Afghanistan and it's now under the control of that country's central bank. Kabul Bank's losses and questionable investments led President Hamid Karzai to act against the politically connected bank, which handles payroll for Afghanistan's army, its schools and other institutions.

Correspondent Joshua Partlow of The Washington Post writes about this, and he joins us now from Dubai. And, first, Josh Partlow, tell us more about Kabul Bank and how important it is in Afghanistan.

Mr. JOSHUA PARTLOW (Correspondent, The Washington Post): Well, Kabul Bank is definitely very important in Afghanistan. It's the largest private bank. It has taken in more than a billion dollars in deposits and has more than a million customers, has branches in every province around the country.

It's also very politically connected. Some of the closest relatives and allies of the president are shareholders and business partners with Kabul Bank and theyve managed to parlay that political connection into vast success in its early years as a bank.

SIEGEL: And what did Kabul Bank do exactly that led to President Karzais sending in the central bankers?

Mr. PARTLOW: The problems at Kabul Bank have been known for some time. Earlier this year, our newspaper, The Washington Post, reported that the chairman had been buying up several luxury houses in Dubai and giving them basically to relatives and supporters of the president.

When times were good this wasn't attracting a lot of attention. But when the Dubai property market crashed, Kabul Bank suffered significant losses and that has led to a power struggle in the last several weeks within the bank. And that tension, some say led certain shareholders in Kabul Bank to give information to investigators about others. And once enough of a case was compiled against the bank, then the president was essentially forced to act.

SIEGEL: I guess this raises a glass half full or half empty question: Is this story a measure of how corrupt things are in Afghanistan or of some new vigilance in the move against corruption there?

Mr. PARTLOW: Right. It could very well be both. I mean, this is one of - many people believe, one of the more corrupt institutions in Afghanistan, but it's also perhaps the first time that President Karzai has taken a firm and proactive, you know, decision to address that corruption in a bank that has ties to his family and supporters.

So some people, including American officials, believe this is a positive development. The central bank is acting as a regulator and trying to reign in a bank that was sort of out of control. So there is perhaps a silver lining in this situation, but it's also very dangerous because right now there's potentially a run on the bank and people in Kabul are trying to get their money out.

SIEGEL: Americans hearing you right now might well be wondering, was this originally U.S. aid money that went from here to Afghanistan into the bank and then to buy luxury villas in Dubai? How do you answer that?

Mr. PARTLOW: That's a good question. I think this is primarily Afghan money, from what I've been told. The bank has more than a million depositors. You know, but it also pays, like you mentioned at the beginning, the salaries of the Afghan army and police, which the U.S. government supports to a large degree. So it could be a mixture of both Afghan and American money at play here.

SIEGEL: Well, I mean, is there a U.S. depositor here who has a, you know, an interest in what happens to this bank?

Mr. PARTLOW: I think the main U.S. interest at this point is preventing Kabul Bank from failing. I mean, there's been a lot of people inside and outside the bank in the last couple days since this central bank decision that have speculated that the end is near for Kabul Bank. And a collapse of Kabul Bank would be catastrophic for the economy and for the fight against the Taliban.

SIEGEL: Joshua Partlow, thanks for talking with us.

Mr. PARTLOW: Thank you very much.

SIEGEL: Joshua Partlow is a foreign correspondent for The Washington Post. He spoke to us about Kabul Bank from Dubai.


Afghanistan Official Tries to Ease Depositors’ Worries About Troubled Bank
Source: The New York Times By: DEXTER FILKINS  

KABUL, Afghanistan — Afghanistan’s top bank official tried Wednesday to calm fears of a meltdown at one of the country’s largest financial institutions, while scores of Afghans lined up to empty their accounts and found the bank unwilling to comply.

The official, Abdul Qadir Fitrat, held a news conference to say that Kabul Bank was more stable than was suggested by the huge financial losses revealed this week. Mr. Fitrat, the chairman of Afghanistan’s Central Bank, urged Afghans to keep faith in the country’s financial system — and to keep their money in Kabul Bank.

“The bank is solvent, the bank is solvent,” Mr. Fitrat said. “Kabul Bank has no cash problem.”

“Kabul Bank would never have cash problems,” he added, “God willing.”

On Tuesday, Kabul Bank, at the behest of the country’s Central Bank, changed its leadership after the discovery of losses approaching $300 million, an amount far exceeding its capital. The revelations prompted fears among American and Afghan officials of a stampede of withdrawals that could set off of a collapse of confidence in Afghanistan’s financial system.

In a measure of just how seriously officials regarded the bank’s troubles, the Central Bank installed its chief financial officer as the new head of the bank.

The other measure of the troubles could be seen Wednesday at the news conference, in the faces of the two Kabul Bank executives who had just resigned. Sherkhan Farnood, the former chairman, and Khalilullah Frozi, the former chief executive, flanked Mr. Fitrat, looking haggard, ashen and unkempt.

Mr. Fitrat, for all his efforts, failed to address some of the larger questions surrounding Kabul Bank, one of the country’s largest private financial institutions. He did not mention the $300 million in losses — compared with just $120 million in assets. Mr. Fitrat promised that the Central Bank would stand behind Kabul Bank “with all its means and power,” but he did not guarantee the depositors’ money.

Finally, Mr. Fitrat did not explain how Kabul Bank got into such trouble in the first place. Mr. Farnood, its former chairman and largest shareholder, appears to have run the bank as much for his own personal gain as to make loans to Afghans, investigators said. He borrowed at least $140 million to buy property in the United Arab Emirates for himself, shareholders say. And he lent $100 million to one of the bank’s other shareholders, Hameed Fahim, the son of Afghanistan’s first vice president.

In addition, Mr. Farnood cultivated a close relationship to President Hamid Karzai, bankrolling his re-election campaign last year.

In the absence of a thorough explanation, many Afghans appeared to disregard Mr. Fitrat’s pleas. By Wednesday morning, the lobby of Kabul Bank was filled with people coming to take out their money. Many of them were told they could not — that the bank did not have any money to give them. Rumors swept through the crowd that Kabul Bank had lost not $300 million, which was bad enough, but $1 billon.

“I have been waiting here since 8 a.m., and they keep telling me, ‘We do not have money, come back tomorrow,’ ” said Wahidullah, the owner of a construction company who came to cash a $50,000 check, and who like many Afghans uses only one name. He had gone to two other Kabul Bank officers and received the same answer, he said.

“There are many people inside the bank, and most of them are worried about losing their money,” he said.

Mr. Wahidullah was not alone in his difficulties. Still, it was unclear exactly why he and other Afghans like him were not able to withdraw any money from Kabul Bank. The new chief executive, Masoud Ghazi, declined Wednesday to answer questions.

The next few days are considered crucial by Afghan and American officials. Worries among depositors could spread, or they could subside.

Sharifullah Sahak and Sangar Rahimi contributed reporting.


In Afghanistan, signs of crony capitalism
Source: The Washington Post By: Andrew Higgins  

Kabul Bank’s Sherkhan Farnood feeds crony capitalism in Afghanistan

Monday, February 22, 2010; A01

KABUL -- Afghanistan's biggest private bank -- founded by the Islamic nation's only world-class poker player -- celebrated its fifth year in business last summer with a lottery for depositors at Paris Palace, a Kabul wedding hall.

Prizes awarded by Kabul Bank included nine apartments in the Afghan capital and cash gifts totaling more than $1 million. The bank trumpeted the event as the biggest prize drawing of its kind in Central Asia.

Less publicly, Kabul Bank's boss has been handing out far bigger prizes to his country's U.S.-backed ruling elite: multimillion-dollar loans for the purchase of luxury villas in Dubai by members of President Hamid Karzai's family, his government and his supporters.

The close ties between Kabul Bank and Karzai's circle reflect a defining feature of the shaky post-Taliban order in which Washington has invested more than $40 billion and the lives of more than 900 U.S. service members: a crony capitalism that enriches politically connected insiders and dismays the Afghan populace.

"What I'm doing is not proper, not exactly what I should do. But this is Afghanistan," Kabul Bank's founder and chairman, Sherkhan Farnood, said in an interview when asked about the Dubai purchases and why, according to data from the Persian Gulf emirate's Land Department, many of the villas have been registered in his name. "These people don't want to reveal their names."

Afghan laws prohibit hidden overseas lending and require strict accounting of all transactions. But those involved in the Dubai loans, including Kabul Bank's owners, said the cozy flow of cash is not unusual or illegal in a deeply traditional system underpinned more by relationships than laws.

The curious role played by the bank and its unorthodox owners has not previously been reported and was documented by land registration data; public records; and interviews in Kabul, Dubai, Abu Dhabi and Moscow.

Many of those involved appear to have gone to considerable lengths to conceal the benefits they have received from Kabul Bank or its owners. Karzai's older brother and his former vice president, for example, both have Dubai villas registered under Farnood's name. Kabul Bank's executives said their books record no loans for these or other Dubai deals financed at least in part by Farnood, including home purchases by Karzai's cousin and the brother of Mohammed Qasim Fahim, his current first vice president and a much-feared warlord who worked closely with U.S. forces to topple the Taliban in 2001.

At a time when Washington is ramping up military pressure on the Taliban, the off-balance-sheet activities of Afghan bankers raise the risk of financial instability that could offset progress on the battlefield. Fewer than 5 percent of Afghans have bank accounts, but among those who do are many soldiers and policemen whose salaries are paid through Kabul Bank.

A U.S. official who monitors Afghan finances, who spoke on the condition of anonymity because he was not authorized to comment publicly, said banks appear to have plenty of money but noted that in a crisis, Afghan depositors "won't wait in line holding cups of latte" but would be "waving AK-47s."

Kabul Bank executives, in separate interviews, gave different accounts of what the bank is up to with Dubai home buyers. "They are borrowers. They have an account at Kabul Bank," said the bank's chairman, Farnood, a boisterous 46-year-old with a gift for math and money -- and the winner of $120,000 at the 2008 World Series of Poker Europe, held in a London casino.

The bank's chief audit officer, Raja Gopalakrishnan, however, insisted that the loan money didn't come directly from Kabul Bank. He said it was from affiliated but separate entities, notably a money-transfer agency called Shaheen Exchange, which is owned by Farnood, is run by one of Kabul Bank's 16 shareholders and operates in Kabul out of the bank's headquarters.

The audit officer said Farnood "thinks it is one big pot," but the entities are "legally definitely separate."

A new economy

In some ways, Kabul Bank is a symbol of how much has changed in Afghanistan since 2001, when the country had no private banks and no economy to speak of. Kabul Bank has opened more than 60 branches and recently announced that it will open 250 more, and it claims to have more than $1 billion in deposits from more than a million Afghan customers.

Kabul Bank prospers because Afghanistan, though extremely poor, is in places awash with cash, a result of huge infusions of foreign aid, opium revenue and a legal economy that, against the odds, is growing at about 15 percent a year. The vast majority of this money flows into the hands of a tiny minority -- some of it through legitimate profits, some of it through kickbacks and insider deals that bind the country's political, security and business elites.

The result is that, while anchoring a free-market order as Washington had hoped, financial institutions here sometimes serve as piggy banks for their owners and their political friends. Kabul Bank, for example, helps bankroll a money-losing airline owned by Farnood and fellow bank shareholders that flies three times a day between Kabul and Dubai.

Kabul Bank's executives helped finance President Hamid Karzai's fraud-blighted reelection campaign last year, and the bank is partly owned by Mahmoud Karzai, the Afghan president's older brother, and by Haseen Fahim, the brother of Karzai's vice presidential running mate.

Farnood, who now spends most of his time in Dubai, said he wants to do business in a "normal way" and does not receive favors as a result of his official contacts. He said that putting properties in his name means his bank's money is safe despite a slump in the Dubai property market: He can easily repossess if borrowers run short on cash.

A review of Dubai property data and interviews with current and former executives of Kabul Bank indicate that Farnood and his bank partners have at least $150 million invested in Dubai real estate. Most of their property is on Palm Jumeirah, a man-made island in the shape of a palm tree where the cheapest house costs more than $2 million.

Mirwais Azizi, an estranged business associate of Farnood and the founder of the rival Azizi Bank in Kabul, has also poured money into Dubai real estate, with even more uncertain results. A Dubai company he heads, Azizi Investments, has invested heavily in plots of land on Palm Jebel Ali, a stalled property development. Azizi did not respond to interview requests. His son, Farhad, said Mirwais was busy.

Responsibility for bank supervision in Afghanistan lies with the Afghan central bank, whose duties include preventing foreign property speculation. The United States has spent millions of dollars trying to shore up the central bank. But Afghan and U.S. officials say the bank, though increasingly professional, lacks political clout.

The central bank's governor, Abdul Qadir Fitrat, said his staff had "vigorously investigated" what he called "rumors" of Dubai property deals, but "unfortunately, up until now they have not found anything." Fitrat, who used to live in Washington, last month sent a team of inspectors to Kabul Bank as part of a regular review of the bank's accounts. He acknowledged that Afghan loans are "very difficult to verify" because "we don't know who owns what."

Kabul Bank's dealings with Mahmoud Karzai, the president's brother, help explain why this is so. In interviews, Karzai, who has an Afghan restaurant in Baltimore, initially said he rented a $5.5 million Palm Jumeirah mansion, where he now lives with his family. But later he said he had an informal home-loan agreement with Kabul Bank and pays $7,000 a month in interest.

"It is a very peculiar situation. It is hard to comprehend because this is not the usual way of doing business," said Karzai, whose home is in Farnood's name.

Karzai also said he bought a 7.4 percent stake in the bank with $5 million he borrowed from the bank. But Gopalakrishnan, the chief audit officer, said Kabul Bank's books include no loans to the president's brother.

Also in a Palm Jumeirah villa registered in Farnood's name is the family of Ahmad Zia Massoud, Afghanistan's first vice president from 2004 until last November. The house, bought in December 2007 for $2.3 million, was first put in the name of Massoud's wife but was later re-registered to give Farnood formal ownership, property records indicate.

Massoud, brother of the legendary anti-Soviet guerrilla leader Ahmad Shah Massoud, said that Farnood had always been the owner but let his family use it rent-free for the past two years because he is "my close friend." Massoud added: "We have played football together. We have played chess together." Farnood, however, said that though the "villa is in my name," it belongs to Massoud "in reality."

Haseen Fahim, the brother of Afghanistan's current first vice president, has been another beneficiary of Kabul Bank's largesse. He got money from Farnood to help buy a $6 million villa in Dubai, which, unusually, is under his own name. He borrowed millions more from the bank, which he partly owns, to fund companies he owns in Afghanistan.

In an interview at Kabul Bank's headquarters, Khalilullah Fruzi, who as chief executive heads the bank's day-to-day operations, said he didn't know how much bank money has ended up in Dubai. If Karzai's relatives and others buy homes "in Dubai, or Germany or America . . . that is their own affair," Fruzi said, adding that the bank "doesn't give loans directly for Dubai."

Fruzi, a former gem trader, said Kabul Bank is in robust health, makes a profit and has about $400 million in liquid assets deposited with the Afghan central bank and other institutions. Kabul Bank is so flush, he added, that it is building a $30 million headquarters, a cluster of shimmering towers of bulletproof glass.

The bank is also spending millions to hire gunmen from a company called Khurasan Security Services, which, according to registration documents, used to be controlled by Fruzi and is now run by his brother.

The roots of Kabul Bank stretch back to the Soviet Union. Both Fruzi and Farnood got their education and their start in business there after Moscow invaded Afghanistan in 1979.

While in Moscow, Farnood set up a successful hawala money-transfer outfit to move funds between Russia and Kabul. Russian court documents show that 10 of Farnood's employees were arrested in 1998 and later convicted of illegal banking activity. Fearful of arrest in Russia and also in Taliban-ruled Afghanistan, Farnood shifted his focus to Dubai.

In 2004, three years after the fall of the Taliban regime, he got a license to open Kabul Bank. His Dubai-registered hawala, Shaheen Exchange, moved in upstairs and started moving cash for bank clients. It last year shifted $250 million to $300 million to Dubai, said the chief audit officer.

The bank began to take in new, politically connected shareholders, among them the president's brother, Mahmoud, and Fahim, brother of the vice president, who registered his stake in the name of his teenage son.

Fahim said two of his companies have borrowed $70 million from Kabul Bank. Insider borrowing, he said, is unavoidable and even desirable in Afghanistan because, in the absence of a solid legal system, business revolves around trust, not formal contracts. "Afghanistan is not America or Europe. Afghanistan is starting from zero," he said.

Fahim's business has boomed, thanks largely to subcontracting work on foreign-funded projects, including a new U.S. Embassy annex and various buildings at CIA sites across the country, among them a remote base in Khost where seven Americans were killed in a December suicide attack by a Jordanian jihadiist. "I have good opportunities to get profit," Fahim said.

'Like wild horses'

Kabul Bank also plunged into the airline business, providing loans to Pamir Airways, an Afghan carrier now owned by Farnood, Fruzi and Fahim. Pamir spent $46 million on four used Boeing 737-400s and hired Hashim Karzai, the president's cousin, formerly of Silver Spring, as a "senior adviser."

Farnood said he also provided a "little bit" of money to help Hashim Karzai buy a house on Palm Jumeirah in Dubai. Karzai, in brief telephone interviews, said that the property was an investment and that he had borrowed some money from Farnood. He said he couldn't recall details and would "have to check with my accountant."

Noor Delawari, governor of the central bank during Kabul Bank's rise, said Farnood and his lieutenants "were like wild horses" and "never paid attention to the rules and regulations." Delawari said he didn't know about any property deals by Kabul Bank in Dubai. He said that he, too, bought a home in the emirate, for about $200,000.

Fitrat, the current central bank governor, has tried to take a tougher line against Kabul Bank and its rivals, with little luck. Before last year's presidential election, the central bank sent a stern letter to bankers, complaining that they squander too much money on "security guards and bulletproof vehicles" and "expend large-scale monetary assistance to politicians." The letter ordered them to remain "politically neutral."

Kabul Bank did the opposite: Fruzi, its chief executive, joined Karzai's campaign in Kabul while Farnood, its poker-playing chairman, organized fundraising events for Karzai in Dubai. One of these was held at the Palm Jumeirah house of Karzai's brother.

The government has returned the favor. The ministries of defense, interior and education now pay many soldiers, police and teachers through Kabul Bank. This means that tens of millions of dollars' worth of public money sloshes through the bank, an unusual arrangement, as governments generally don't pump so much through a single private bank.

Soon after his November inauguration for a second term, President Karzai spoke at an anti-corruption conference in Kabul, criticizing officials who "after one or two years work for the government get rich and buy houses in Dubai." Last month, he flew to London for a conference on Afghanistan, attended by Secretary of State Hillary Rodham Clinton and other leaders, and again promised an end to the murky deals that have so tarnished his rule.

Also in London for the conference were Farnood, who now has an Afghan diplomatic passport, and Fruzi, who served as a financial adviser to Karzai's reelection campaign and also owns a house in Dubai. "If there is no Kabul Bank, there will be no Karzai, no government," Fruzi said.

Correspondent Joshua Partlow in Kabul and special correspondent Anna Masterova in Moscow contributed to this report.

 

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