Afghan official: Country's top banker flees nation amid Kabul Bank scandal

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Afghan official: Country's top banker flees nation amid Kabul Bank scandal

By Deb Riechmann, The Associated Press | The Canadian Press – 8 minutes ago

KABUL - Afghanistan's top banker, who is alleged to have played a role in the

failure of the nation's largest private lender, has fled the country, a

spokesman for President Hamid Karzai said Monday.

Karzai spokesman Waheed said Fitrat had not notified the Afghan government

of his resignation. But he said that Fitrat was named in a report sent Monday to

the Afghan attorney general's office as someone possibly responsible for the

failure of Kabul Bank.

Fitrat told The Associated Press in a telephone interview from a Northern

Virginia hotel that he left the country because his life had been threatened and

that the Karzai government was refusing to prosecute those allegedly involved in

fraudulent loans.

" My life has become completely endangered, " Fitrat said. " Since I exposed the

fraudulent practices on April 27 in parliament I have received information about

threats on my life. "

He said he has permanent resident status in the United States and would not be

returning to Afghanistan.

The former bank governor said he asked for the Karzai government to prosecute

those involved in the alleged fraud 10 months ago.

" To date, there is no information of any credible plan to try and prosecute

these suspects for the crimes they have allegedly committed, Fitrat said in

taking the unusual step of resigning in the U.S. rather than Afghanistan.

Kabul Bank, Afghanistan's largest private financial institution, nearly

collapsed last year because of mismanagement and questionable lending practices.

The bank — now under the control of Afghanistan's central bank — became a symbol

of the country's cronyism and deep-rooted corruption and is now considered a

bellwether on attempts to root out patronage and show accountability to world

financial institutions, such as the International Monetary Fund.

Afghanistan has stepped up efforts to recover hundreds of millions of dollars in

fraudulent loans made by Kabul Bank, which plays a key role in the Afghan

economy by handling payrolls for government workers and security forces and has

close ties to Afghanistan's ruling elite.

The former bank chairman, Sherkhan Farnood, a world-class poker player who

raised money for Karzai's re-election campaign, owned 28 per cent. A brother of

one of Afghanistan's two vice-presidents was once a shareholder, and Karzai's

eldest brother, Mahmood Karzai, had owned 7 per cent.

Besides buying property in Dubai, United Arab Emirates, the shareholders of

Kabul Bank took out loans to heavily invest in an airline, fuel and gas

companies and two shopping malls in Kabul, Fitrat said earlier this year.

The bank scandal weakened confidence in Afghanistan's financial system and has

prevented the IMF from completing a new program for the country.

A report released in May by Afghanistan's anti-corruption office showed about

$467 million of outstanding loans were made without appropriate documentation or

collateral. A recent USAID inspector general report estimated that fraudulent

loans diverted $850 million to bank insiders.

Afghan officials blamed the central bank's weak oversight of Kabul Bank for its

demise.

Fitrat last month rejected those allegations. The central bank chief said he

asked for forensic auditing help from the IMF and the U.S. Treasury Department

after hearing that some used the loans to buy luxurious mansions in Dubai. Some

used the money to invest in risky prestige projects like an airline and shopping

malls in Kabul.

Fitrat also said more than half of those who benefited from the loans continued

to be able to move in and out of Afghanistan, despite central bank efforts to

ban them from foreign travel. The bank chief declined to name those individuals,

saying criminal law prevented him from releasing their names. The government has

seized the passports of a number of bank employees to prevent them from

travelling until the investigation is finished, but shareholders passports have

not been taken.

The IMF has been reluctant to extend new credit to Afghanistan in the wake of

the scandal. The U.N. has said some $70 million in spending for government

activities could be withheld without IMF support.

Though international allies and the head of the central bank have called for the

Afghan government to prosecute those involved in fraud or other illegal activity

at Kabul Bank, the investigatory commission said that any decision on who to

take to court will be made by Karzai. Karzai's administration has previously

blocked attempts to go after his close associates for corruption or misconduct.

___

Associated Press writer R. Hurst contributed to this report from

Washington.