Guess Who Paid For Karzai Coteries' Mansions?

By Steve Hynd

Guess who paid for the shiny Dubai mansions the Karzai elite of Afghanistan purchased? I invite you to join the dots.

Firstly, US taxpayers have always been the ones paying for much of the Afghan government's structure, especially the security forces. They're going to be doing it for the forseeable future too

The United States expects to spend about $6 billion a year training and supporting Afghan troops and police after it begins pulling out its own combat troops in 2011, The Associated Press has learned.

The previously undisclosed estimates of U.S. spending through 2015, detailed in a NATO training mission document, are an acknowledgment that Afghanistan will remain largely dependent on the United States for its security.

Secondly, those Afghan security forces get paid through the Kabul Bank that it so near collapsing - and taking what little there is of the Afghan economy with it. The throughput of that wageroll money may be the only thing keeping the bank afloat.

Despite the heavy demand for withdrawals, Fitrat chose to look at the positive side, saying that customers have deposited between $11 million and $17 million per day over the past several days. However, those deposits were made largely by companies that route payments through the bank and have little choice. Kabul Bank has more than 1 million customers and handles salary payments for soldiers, police and teachers.

Thridly, not only are US taxpayers paying those salaries washing through Kabul Bank, they paid to set up the failing Afghan banking system in the first place.

Set up with U.S. financial assistance following the Taliban's ouster, the Afghan banking system is young yet already deeply integrated into the country's affairs. Of the country's banks, Kabul Bank controls perhaps 40% of the industry, until last week holding deposits of around $1.3 billion, spread out over 1 million accounts � among them the accounts of some 250,000 public employees. But, according to insiders, toothless oversight by the country's central bank has allowed well-connected business interests to abuse the system. "Everyone knew a year ago � even before that � that Kabul Bank was going to crash," says a top executive at another major private bank. Given Kabul Bank's lopsided role in the country's banking sector, he reckons that a couple of smaller banks with liquidity troubles may also fail if the crisis of confidence deepens. "If in five years [Kabul Bank] can fail so dramatically," he says, "then you have to have doubts and misgivings about others."

The Kabul Bank is failing because Karzai's elite used it as a personal piggy bank. Karzai's brother Mahmoud was loaned millions by the bank, without meaningful collateral - and used that loan to buy a 7% stake in the bank (!) as well as a Dubai mansion. He's not the only member of the Karzai elite to have made out like a literal bandit from the bank's crony capitalism. Anti-corruption expert Prof. William K. Black, in a must read post in which he connects Kabul Bank to the New Ansari money-moving scandal and to another bank, Afghan United, writes:

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.

Prof. Black's essay is entitled: "Kabul Bank: When They Don�t Fear the Regulators Enough to Even Hide the Abuses".

Which brings me to the final dot, one I blogged about yesterday: the US government has known all along what's going on and blithely looked the other way.

American officers and anti-corruption teams have drawn up intricate charts outlining the criminal syndicates that entwine the Afghan business and political elites. They�ve even given the charts a name: �Malign Actor Networks.� A k a MAN.

Looking at some of these charts�with their crisscrossed lines connecting politicians, drug traffickers and insurgents � it�s easy to conclude that this country is ruled neither by the government, nor NATO, nor the Taliban, but by the MAN.

It turns out, of course, that some of the same �malign actors� the diplomats and officers are railing against are on the payroll of the C.I.A. At least until recently, American officials say, one of them was Ahmed Wali Karzai, the president�s brother. Mr. Karzai has long been suspected of facilitating the country�s booming drug trade.

Ahmed Wali Karzai denies taking any money from the C.I.A. or helping any drug traffickers. But consider, for a second, the other brother: President Karzai. When he receives that stern lecture from the American diplomat about ridding his government of corruption � and he receives a lot of them � what must President Karzai be thinking?

One possibility: That the Americans aren�t really serious.

So you - yes, you - paid for the Karzai elite's Dubai mansions and opulent lifestyles. And your government over two administrations has not only connived to help make that happen but intends that you should go on doing so for the forseeable future.

Happy Labor day!