KABUL, (Reuters) – The chief investigator probing Afghanistan’s biggest ever financial scandal says he will stop at nothing to put the real culprits in a multi-million dollar bank fraud behind bars.
As a result, Judge Shamsul Rahman Shams fears for his life.
Even for a country ranked as one of the world’s most corrupt, the shocking theft of about $935 million from the Kabulbank two years ago and the subsequent foot-dragging in prosecuting those responsible underlines concerns about Afghanistan’s ability to manage its finances and enforce the rule of law.
The tough-talking Shams, conscious his country is under close scrutiny over how it handles the embarrassing case, says no-one — regardless of political or business connections — will be spared.
“We are flexing our muscles with the big guys who could easily get rid of us, but we are committed to solve this case,” said Shams, who heads a special court investigating 22 people in the scam that brought the commercial bank to its knees.
“We know it’s a dangerous task but we’re not scared. I don’t have a bodyguard and as soon as I announce the rulings I’ll be in trouble,” Shams told Reuters in his bunker-like office in a basement of a fortified Kabul house.
The bank’s collapse triggered a financial crisis, civil disorder and a run on deposits, worrying foreign donors and embarrassing the U.S. and Afghan governments, which had touted its credentials as a modern lender integral to developing a tiny economy crippled by war and mismanagement.
The government bailed out the country’s then biggest lender, and relaunched it as the state-run New Kabul Bank.
The list of those implicated appears like a page from a who’s who of finance and big business in Afghanistan. Among them are the bank’s current and former chiefs, its founder and the brothers of President Hamid Karzai and his first vice-president, Mohammad Qasim Fahim.
A report released on Wednesday detailed for the first time allegations of poor or reluctant law enforcement, political interference, questionable oversight by foreign auditors and institutionalised fraud by Kabulbank officials.
The outcome of the case is seen as a crucial barometer of Afghanistan’s commitment to stabilising the economy and its fight against corruption, two years out from the withdrawal of most foreign troops and a possible winding down of billions of dollars in international aid.
PROXIES, FORGERIES, FAKES
The probe by the government-funded Independent Joint Anti-Corruption and Evaluation Committee named no individuals but revealed two sets of books were kept by Kabulbank, one to satisfy regulators and another tracking the real disbursement of funds through a loan-book scheme for proxy borrowers. They used forged supporting documents, fake business stamps and statements provided by accounting firms complicit in the scam.
The report was also critical of “clean assessments” from independent auditors.
It also showed how stolen funds were concealed — disguised as large expenses, bonuses, rents and salary payments to ghost staffers. Some funds were siphoned out of the country either electronically or in cash aboard Pamir Airways, owned by shareholders linked to the bank.
Those handling the bank investigation have been accused of being sluggish. Shams, the judge leading the probe, said the process is extremely complex, but criminal proceedings would be wrapped up “very soon”. “We want to reassure everyone that we’ll spare no one,” he added.
But two have already been spared thanks to a presidential decree in April that granted immunity from prosecution to any of those implicated who returned funds within two months. The two who responded were Mahmoud Karzai, the president’s brother, who has paid back $22 million and Haji Hasseen, the vice-president’s sibling, who returned $18 million, according to Shams.
Only two of those charged with fraud are in detention: the bank’s founder Sherkhan Farnoon, and its former chief executive, Khalil Fruzi. Five have fled the country and the rest are on bail, including New Kabul Bank Chairman Masood Musa Ghazi.
Abdullah Dowrani, chief of the Financial Disputes Resolution Commission, says around $140 million in capital has been recovered, on top of more than $200 million in property assets and $218 million in debt to be returned by borrowers.
Aside from the $560 million in unpaid interest, Dowrani said much of the rest should not be difficult to recover.
Contrary to popular assumption that most of the money ended up in Dubai, he said, as little as 10 percent was smuggled overseas and channelled into luxury villas.
The rest was invested in Afghanistan, from an oil storage facility, a television station and a gas firm to large-scale property developments, some of which the government had agreed to purchase.
“The important thing is for us is to overcome this challenge and prove to the world that there is a system in place, though it is new, it is weak for the time being, it has tomorrow,” Dowrani said.