Through their various contacts in the Afghan businessworld, Meyer’s investigators had learned about the growing rift within the top ranks of Kabul Bank, including fights that got so heated that Farnood had hurled a teacup at another shareholder’s head. Calestino suggested to Meyer that they send a DEA agent to Dubai to meet with Farnood, to see if he was disgruntled enough about the situation to share information with the Americans. “It was sort of like the priest showing up at your house for confession; you didn’t even need to go to the church,” one team member put it.
Farnood, it turned out, was so angry about the brewing coup d’etat at Kabul Bank that he was ready to list, in graphic detail, all his sins. After the initial meeting in Dubai, Meyer and Calestino realized that the Kabul Bank problem was going to dwarf the scandal they had uncovered at New Ansari. They summoned Farnood to Kabul and over the course of dozens meetings, Farnood described the inner workings of what amounted to a bank heist. At first, those meetings took place in the polished calm of the Serena Hotel. Soon, however, the Afghan monitors who worked with Meyer and wiretapped calls throughout the Afghan business and political elite tipped him off to the fact that Farnood’s rivals within the bank were following his movements, and had the license plate number of the SUV that Meyer and Calestino drove to the hotel. Until then, the armored car was mostly frustrating because the wiring was shoddy and the battery would often die, forcing the two men to whip out jumper cables in the Kabul gridlock. After they learned they were under surveillance themselves, they brought Farnood to Meyer’s apartment in the embassy, which they knew was not bugged.
In those meetings, Farnood provided reams of documents and bank records, spilling out details that incriminated himself and his partners, explaining what a forensic auditor later concluded: “From its very beginning, the bank was a well-concealed Ponzi scheme.” Farnood was surprisingly candid about many aspects of his business, including his notorious connections. He told Meyer that before September 11, he moved money for both the Taliban and al-Qaeda. He described how he had brought on Mahmood Karzai and Haseen Fahim to give him political cover with both Pashtun and Tajik leaders in Afghanistan and how that decision eventually backfired as they formed an alliance against him. If there was an appropriate war-zone metaphor for this soul-bearing, it might be that of the suicide bomber. In order to prevent his business partners from stealing his bank, Farnood was willing to destroy it. But why? “Every time I talked to Sherkhan and asked that question,” a member of Meyer’s team recalled, “he said if he’s going down, he’s taking everybody with him.”
In a way, Farnood, with his scam, had achieved what many other reformers in Afghanistan had failed to do: seamlessly meld the old customs of Afghan culture with modern Western technology. The key to the deception was how he’d combined his hawala money-transfer business, Shaheen Exchange, with Kabul Bank. Farnood would move money between these two institutions, which allowed him to keep two sets of books. Money would often be sent—by wire transfer or in stacks of cash on a Pamir Airways flight—to Dubai, where the hawala would provide it to the ultimate recipient. In the records of the bank, a loan would be attributed to one name, while the Shaheen records would indicate the true recipient. “Shaheen Exchange was the front for the insider loans,” one former senior official who worked at the bank for several years told me. “All the insider loans were given in different names, and the loan proceeds were credited to Shaheen Exchange. From that account the funds were either transferred or withdrawn.”
Farnood and Ferozi would give millions of dollars to people of their choosing: business partners, shareholders, politicians, friends. This was illegal for several reasons. There were rules for “related party” lending, giving money to owners or employees of the bank, which were disregarded. The size of the loans also exceeded the legal limits. Another problem was that Kabul Bank had no expectation that these loans would be paid back. In essence, they were gifts.
To mask their loans, the bankers would break them up into smaller pieces so that they wouldn’t attract attention or violate the legal lending limit. A large loan intended for one person would be issued in several parts in the name of various fictitious companies, often named after the recipient’s relatives, employees, servants, or bank bodyguards. The bank’s loan portfolio had grown from about $100 million in 2006 to more than $900 million by the time Farnood sat down with Meyer. In its official filings, Kabul Bank claimed that 80 percent of its income came from interest payments on these loans. In fact, the bank had collected hardly any interest and had become insolvent within a year of its inception. The challenge, as this illicit lending increased, was to find ways to mask the recipients of the money and give the impression the loans were being paid back. This required some invention. When the business licenses of these front companies would expire, after a year, the credit department would dip into the bank’s deposits to issue a new, larger loan, to create the appearance of repayment. For example, a $1 million loan that went unpaid would be followed by a $1.5 million loan—to a new fake company—to give the appearance that the initial loan had been paid off with interest. This operation could work only with a growing pool of deposits to draw from, which Farnood had, thanks to his popular lottery drawings, as well as the support for Kabul Bank from the U.S. government and foreign donors.
To help facilitate the scam, the bank’s credit department operated like an arts-and-crafts class. After the money had been given out, the staff would create a loan file for the fictitious firms, with business licenses, articles of association, tax returns, and business plans. Several auditing firms—such as Best Solutions Accounting, Naweed Sahar Accounting, and Oriental Consultants, some of which were run by people with family relationships to the Kabul Bank leadership—provided audited financial statements for the front companies. Sometimes their work would get sloppy. Investigators looking back on the bank’s operations found that financial statements for different companies were often almost identical; in other cases, the paperwork didn’t match the company. On one loan file, the credit appraisal claimed that the company’s industry was “furniture and carpets,” while the supporting invoices showed purchases of cement, steel, and wood. The same photographs of construction materials, intended to portray a functioning company that was actually making a product, were used in several loan files. When investigators inspected the bank’s premises, they found 114 rubber stamps in the names of fake companies—Jamal Naser Trading, Abdul Mahmood Trading—used to make loan applications look official. The bank records would show that Mahmood Karzai had taken out $22.2 million. This had been recorded as ten separate loans under names such as Abdul Rahim, Dawood, and Sultan Mohammad Hafizullah LTC.
“I’ve seen some really, really bad banks, but I’d never seen one with so much fraud,” Kat Woolford, an International Monetary Fund official who worked in Kabul, told me. “These guys were crooks, real honest to God crooks. I’ve never seen anything like it.”
Meyer and Calestino laid out their findings to Ambassador Eikenberry. Once they understood how the bank operated, and how severely it had been looted, they became convinced that it could not survive. The embassy notified Fitrat and explained the gravity of the situation. Fitrat went to President Karzai and told him that he needed to demand the resignations of the Kabul Bank leadership and have the government seize control of its operations. Karzai’s government would then have to try to get the shareholders, including his brother, to pay back nearly $1 billion in loans. Otherwise, the country’s financial system would be on the brink of collapse.
9
CLOSE COUSINS
FARID KARZAI WAS TALL AND HANDSOME, a young man with thick, dark hair and an open, intelligent face that showed a clear resemblance to President Karzai and his brothers. But those were the “Big Karzais,” Farid told me the first time I met him, and he was not one of them. “In Afghanistan, someone could be your cousin, but that doesn’t mean they’ll stand by you,” he said. “He might do whatever it takes to destroy you.”
One of the first things foreigners tend to learn about Afghanistan is the concept of Pashtunwali, the tribal code of conduct that makes the Pashtun such an exotic specimen to outsiders. It includes concepts like extreme hospitality: the insistence on offering food and shelter to anyone who arrives at your door, even a hated rival. It calls for loyalty, faith, courage, and the “protection” of women. Yet I found that the closer one looked, the harder it was to see these customs in daily life. They seemed to be characteristics that Pashtuns liked to remark about themselves collectively but did not bother practicing individually. One of the more intriguing, and visible, of the Pashtun principles, however, was the celebration of revenge. It was known as badal, and it was necessary whenever one’s honor and reputation were called into question. “If René Descartes had been a Pashtun,” one of President Karzai’s former advisers told me, “he would have said, ‘I have enemies, therefore I am.’ ”
This tradition had surprisingly tangible consequences throughout the war. The U.S. military was constantly forced to sort through whether some act of violence had been motivated by the insurgency or the result of blood feuds within families and tribes. Afghans realized the limits of American understanding about their culture and could exploit this ignorance. It wasn’t uncommon to hear stories of how Afghans fed faulty intelligence to the U.S. military so they would take out “Taliban” targets that later turned out to be family rivals. American soldiers also had to navigate delicate negotiations over family honor. When they killed civilians or damaged property, soldiers would decide on condolence payments in money or livestock so that order was restored and wider tribal revenge averted. Some of the customs could make Americans feel very far from home. After one particularly heinous crime, when a U.S. soldier massacred several Afghan civilians, the commanding general called Qayum Karzai, the president’s elder brother, and asked what Afghans would do to settle such an enormous debt. “Well, you can’t do what the Afghans would do,” Qayum told the general. “Because we would give them a daughter.”
I met Farid Karzai when he was on the run, a frightened twenty-year-old caught in one of these family feuds. There were lots of pressures on the Karzais from the outside: the president’s fights with the Obama administration, the investigations into Ahmed Wali and Mahmood, the threats from the Taliban. But there were also internal stresses that were harder to unravel. One thread that kept emerging was a dispute that reached back decades yet still appeared to influence the politics of Kandahar and the wider war. I hoped Farid, a minor character in the vast drama of Karzai relatives, could help me understand this backstory and explain the rivalries that were pulling the family apart. He agreed to meet me at the Continental Guest House, one of the few places in Kandahar, outside of military bases, where foreigners could stay.
The hotel was pretty grim. If you spent enough time there, you could hear all sorts of violence outside: car bombs, mortar blasts, gunfire. Breakfasts were particularly depressing, with muttering clusters of Indian engineers or Pakistani agronomists eating stale bread and swirling their Nescafé, seemingly wondering if their NATO seed-distribution contracts or road-building projects could possibly be worth the risk of living here. Half the time the power would be out. The sign on the gate showed a picture of a pistol, but it had been misspelled in Pashto so that instead of “No Weapons” it read, “No Grace.”
We sat at a white plastic table in the back garden under a hot morning sun. Farid was wearing a brown shalwar kameez and held a string of black prayer beads. He spoke in a high-pitched, nervous way. As we talked, I tallied fourteen gunshots in the background before I lost count.
“I believe there is a great threat to my life,” Farid said. He was not sure if he should have come to meet me, but his desire to explain his predicament won out. “I am taking some security precautions. I cannot distinguish between the Taliban and the government. After what happened to my family, I’m scared of them both.”
Farid told me a bit about himself. He had moved out of his home village of Karz and was living in hiding with his mother, Farida, and his youngest sister, Sonia, in a shabby apartment in Kandahar City. He was broke. While the other Karzais traveled in armored Land Cruisers and lived in fortified mansions, he got around Kandahar hitching rides in rickshaw taxis. And with his sixth-grade education, finding work was difficult. In an attempt to raise money for his wedding, he bought a tiny tarp-covered plywood stall in the outdoor market known as Charsu, or “Four Directions,” to sell brightly colored children’s clothes imported from India. The market was a claustrophobic warren that smelled of boiling vats of oil and platters of herring-sized fish left out in the sun. You could buy cheap plastic necklaces or bags of okra or a small green parrot from a rickety wooden cage. Farid disliked the work. The environment was oppressive, and he wasn’t making much money. In an average day, he would earn four dollars.
But his more pressing concern was his safety. Both his father and his brother had recently been murdered, leaving him the family’s lone surviving male. Explaining their deaths required a story that started quite a ways back. But it was a story Farid was desperate to tell.
Credit 9.1
Farid Karzai in the alley leading to his house in the village of Karz
“Everyone knows what happened to my family,” he said. “And everyone knows it is just a matter of time before somebody comes for me.”
—
The origins of Farid’s story go back to the late 1970s, before he was born. After Hamid Karzai graduated from high school in Kabul, his family sent him to study in India. The decision was a bit spontaneous, his relatives recalled. Hamid had a cousin, Masoom Kandahari, in medical school in New Delhi. Masoom remembers visiting Hamid’s house and Hamid’s mother, Durkho, asking how he liked his studies abroad. Masoom, who would go on to be a hematologist in Arlington, Virginia, told his aunt he enjoyed medicine but the weather was unbearably hot and the food too spicy.
“Then my aunt said, casually, ‘Hamid’s not doing anything. Why don’t you take him with you?’ ” Masoom remembered.
Hamid traveled with his cousin to Delhi, with the intention of studying medicine as well, but after a few months he moved to the northern town of Shimla, an old British garrison post in the mountains, where he preferred the cooler weather. His interest in medicine soon flagged—he’d always had trouble in science courses while in high school in Kabul—and when he enrolled at Himachal Pradesh University, he took classes in English and political science.
As a teenager in the 1970s, Hamid had adopted a bit of the hippie style popular even in Afghanistan. His sister recalled how she would sew flowers onto his bell-bottom jeans. At university, he liked to affect the style of what the British writer William Dalrymple described as a “bookish fop,” wearing a suit and carrying a sun umbrella as he walked to the mall. Hamid lived in a large Georgian cottage in Summer Hill
, just west of the town, an area that appealed to Hamid because it was near where Mahatma Gandhi stayed on his visits to Shimla.
The language was difficult for him in the beginning, and he failed his first-term English course. He studied diligently and worked with an Anglo-Indian tutor, who helped him develop his British-accented English. He soon adopted “the old-fashioned English of newspapers in the subcontinent, addressing women as ‘ma’am’ and using expressions such as ‘turning turtle’ and ‘miscreants,’ ” the journalist Christina Lamb has written. Hamid also developed a fascination with British colonial history and literature. In Shimla, he recalled, “there was a lovely cinema called the Regal by the ice-skating rink. Fridays I would go and see Peter O’Toole movies…Goodbye, Mr. Chips and Man of La Mancha.” He read Thomas Hardy and Alfred, Lord Tennyson, Percy Bysshe Shelley and George Eliot’s The Mill on the Floss. He seemed uninterested in the usual youthful rebellions.
Another cousin, Hashim Karzai, who was studying at Punjab University at the time, often came to visit. “The guy did not have any habit of anything,” Hashim recalled. “No smoking, no drinking. Nothing. That really bothered me. I was smoking back then. He would sit in the window. It was very cold in the summer. He would say, ‘Hashim, is that your last cigarette? You swear you’re not going to smoke anymore?’ And I’d say, ‘Yes.’ And he’d close the window.”
A Kingdom of Their Own Page 24