In his letter to Kerry, he took a more humble approach. “As you know, I am an American citizen who is the older brother of President Karzai,” he began. “After 9/11, like many of my Afghan compatriots, I returned to my homeland to try and rebuild the country devastated by decades of Communist rule, the Soviet invasion, civil war, and then the Taliban. I am actively involved in business and politics.” Mahmood said that his success in business and his “tendency for straight talk” had won him many enemies, who had spread rumors about his finances. “My brother, President Karzai, was very disappointed with me when you told him that I have tens of millions of dollars in bank accounts. I have no doubt that you said that to my brother because you believed it to be true. But it is false.
“I have been in business in the US since 1985,” he went on. “I started in this country with double shift jobs and worked my way up to eventually owning four restaurants, some development and commercial property, and I even built my own custom home. Most of the wealth I have today is the result of my hard work over 24 years in America.” He was an investor in the nation’s only cement factory, he said, which, despite continuing to lose money, employed fifteen hundred Afghans. His gated town was “the first modern city in Afghanistan” and “has changed the face of Kandahar.
“Senator Kerry,” he said, “I am an honest entrepreneur. I believe in transparency, something you will not find in those with something to hide. To prove my claim, I am setting forth my financial information, explaining how much money I have as well as where it came from. In my opinion, the essential question in Afghanistan after 9 years is ‘Where did the money come from?’
“I certainly hope that after you and your staff has an opportunity to carefully review this information, you will find it persuasive of my good intent and conduct, and not allow others to assassinate my character by malicious innuendo and rumor. This information is current.”
Over the next two pages, Mahmood told Kerry about his U.S. earnings ($305,742), the capital gains from the sale of his home in Dubai ($900,000), his deposits in his personal account at Emirates Bank in Dubai ($724,824), his payment to Georgetown University for his daughter’s tuition ($202,571), and his deposit to a colleague “in anticipation of a joint venture” ($2,134,330). In an attached personal financial statement from Sandy Spring Bank, he claimed his net worth was $12,147,491. He concluded, “I hope this letter will help you realize that I am one of America’s trustworthy and honest allies in this war. Knowing the friends upon whom you can rely is critical.”
—
The closest anyone would come to the truth about what happened inside Kabul Bank was the forensic audit done by Kroll, a New York–based corporate investigations firm, in late 2012. The investigators combed over files from the bank and its affiliated hawala company, Shaheen Exchange, as well as Sherkhan Farnood General Trading. It was impossible to know the full picture, since there was no record for how some of the cash had been spent, or to whom it had been given. But in their confidential 277-page report, Kroll’s auditors concluded that “from its very beginning, the bank was a well-concealed Ponzi scheme.” Despite its optimistic annual reports, the bank had in reality been insolvent within a year of its founding, and by the time of its collapse it had a negative equity of more than $750 million. “The loan book scheme commenced from the inception of the Bank and was the primary purpose of its existence,” the report read. The fraud continued “unchecked to the point where the Bank was highly insolvent and unsustainable as a going concern. Once the true nature of the loan book was revealed, the subsequent collapse of the Bank was inevitable.
“The Bank never operated as a legitimate bank: a bank that seeks to safeguard depositors’ money and generate profits through successful and prudent loan book management. Instead, the Bank has been used to provide free financing to the other business interests of senior management and a group of connected persons.” The auditors found that more than 92 percent of the bank’s loan book, or $861 million, had gone to nineteen related people and companies, “and substantially to the benefit of 14 individuals, who were not required to make repayments.”
The auditors pored over $5.2 billion of international transfers made through the bank’s SWIFT server over a four-year period beginning in the spring of 2007. They found that money was zipping around the world: Dubai, Switzerland, India, Turks and Caicos, Germany, Russia, Latvia, South Korea, the United States. Kabul Bank had poured $116.4 million into trading and textile companies in China, including Farnood’s Xinjiang Qitai Xilu Co. Limited, in the province of Xinjiang, bordering Afghanistan (he also ran a hawala in China). The bank paid $46 million to GE Commercial Aviation Funding in the United Kingdom to purchase aircraft for Pamir Airways, which Farnood partly owned and where Hashim Karzai, the president’s cousin, worked as a consultant. Farnood went on shopping binges at Louis Vuitton and Versace. He spent $1.08 million on his gambling account at the Bellagio in Las Vegas, plus another $150,000 at the Commerce Casino in Los Angeles. Ferozi, the bank’s chief executive, dispatched $3 million to his private HSBC account in Switzerland. Mahmood Karzai shipped more than $300,000 to accounts in his name in Dubai and $15,000 to his cousin Hashim’s account in the United States. By Kroll’s calculations, Mahmood owed as much as $30.5 million in total, of which he had paid off just $5.2 million. As of the day of the bank’s collapse, August 31, 2010, of the five people who owed the most money in the Kabul Bank scandal, four were the most famous men involved: Farnood ($270.3 million), Ferozi ($94.3 million), the vice president’s brother Haseen Fahim ($43.6 million), and Mahmood Karzai.
Kroll determined that Farnood, through 160 proxy loans provided through a collection of loans known as the Zahir Group, was responsible for $467.5 million, although since much of that money had then been redistributed to other people, the adjustment brought it down to nearly $300 million. “The main implication of these findings is that Farnood used the Zahir Group loans primarily for his own personal enrichment,” Kroll found. A document given to me by one of the employees at Kabul Bank describing the Zahir Group lists the names of 229 people who apparently received money from these loans (a version used by Kroll had 227 entries). The list includes a Who’s Who of the Afghan government and business elite: Vice President Mohammad Qasim Fahim, identified as Marshal Fahim ($373,928); Finance Minister Omar Zakhilwal ($233,997); former speaker of parliament Yunus Qanooni ($1.27 million); Uzbek warlord Abdul Rashid Dostum ($1.29 million); and Yama Karzai, a top intelligence official and a cousin of the president’s ($346,008). However, Kroll found that the entries for these names, by themselves, could not be corroborated, as they had been provided by Farnood and existed without other documentation. “The Receivership has been unable to discern whether the allocations were correct and allocated parties are being dishonest, or whether the allocation itself was flawed. This has left the Receivership without a sound platform from which they could ultimately pursue disputed amounts,” Kroll wrote. “We cannot discount the possibility that [Farnood] may be incentivized to mislead investigators and the Receivership in an attempt to conceal his own personal gains.”
That finding said much about the Afghan war. You could never quite reach the bottom. Everything had deeper layers, further culprits, a society cloaked for America in a shroud of foreignness. This was the murk that the anti-corruption crusaders—Kirk Meyer, Herbert R. McMaster—submerged themselves in and were never able to emerge from. Even if you thought you knew, thought you were so achingly correct, nothing would come of it; everything slipped away. By the time of the Kroll report, more than two years after Kabul Bank collapsed, just 10 percent of the money taken had been repaid. Mahmood Karzai, in an interview with The New York Times, called the Kroll report “a piece of puke.”
—
When I met Sherkhan Farnood, in the summer of 2011, he was in legal limbo following the collapse of his bank. He was not in jail but was confined to living in a dingy second-story guest room at the bank headquarters, watched by Afghan intelligence agency guard
s. The bank was located on a busy downtown commercial street, between two cell phone shops, in a building that had once housed the Pakistani embassy. The neighborhood, known as Shar-e-Naw, was pleasant, particularly at night, when colored lights illuminated the kebab restaurants and ice cream parlors. On the sidewalk you could buy a goldfish in a plastic bag or a peacock on a leash. Children darted in and out of traffic, swinging tin cans of smoking scented embers, a concoction said to ward off the evil eye, which they would waft over your windshield for a donation.
The bank’s three-story, blue-glass façade stood out among the smaller storefronts, but it did not appear lavish, and the room where Farnood was staying, up a flight of dented metal stairs off a back courtyard, had none of the luxury of his former office. After he’d been ousted, his company had been renamed New Kabul Bank. When I met him, he was wearing a T-shirt and looked disheveled and depressed. He was working on his laptop, and I sat down on the couch next to him and waited. After an awkwardly long silence, he apologized and said he needed a little more time. He was playing online chess with a teenager in Russia, he explained, and he had to finish the game. He finally snapped shut his laptop and turned to me. “I hate to lose,” he said.
His legal status was difficult to decipher. After his period of sleeping in the bank under armed guard, he was detailed to “house arrest” at a mansion, where he hosted high-stakes poker games in a pink sitting room. During this home-detention phase, I would sometimes see him on the treadmill at the Serena Hotel, in a sweaty white V-neck tee, his face red with exertion, running with bullish determination. Once when I called him, he claimed to be in prison (cell phone service apparently uninterrupted) and said that he couldn’t talk but would be happy if I visited.
Just as house arrest didn’t equate with staying at home, the reality of the Kabul Bank prosecutions never squared with the rhetoric of punishment and justice issuing from Karzai’s palace. Under continuous pressure from the U.S. government, the IMF, and others, President Karzai had acquiesced to the forensic audit. In April 2011, he agreed to put the bank in receivership so that an independent organization could attempt to recover some of the stolen money. A year passed. In April 2012, Karzai created a special tribunal to prosecute those responsible. In his decree, Karzai ruled that anyone who paid off his debts within two months could forgo interest and would not be prosecuted. The tribunal issued indictments against twenty-one people. Mahmood Karzai, Haseen Fahim, and other shareholders who’d taken millions in loans were not among them. Farnood and Ferozi received indictments, along with rank-and-file bank staffers and the regulators at the Central Bank, including Fitrat, who by then was living in Virginia.
The case required a level of technical expertise that far surpassed the abilities of Afghan prosecutors. The country’s banking system was barely a decade old and the justice ministry did not have many people trained in understanding complex financial transactions. When Farnood took the stand, he rattled off math equations, accused everyone else, insisted that he had never told a lie, waved around a water bottle, and said things like “We have studied in school that one mass cannot occupy two spaces at the same time.” He announced: “My debts are zero.” Then he amended this statement. In fact, he said, “the government owes me $100 million right now. But I am announcing that I won’t take this money.”
On March 5, 2013, the special tribunal handed down convictions of all twenty-one people charged. The Independent Joint Anti-Corruption Monitoring and Evaluation Committee, which had investigated the bank scandal, found the convictions “alarming” because of the light sentences for the perpetrators and the punishment for “others who appear to have had little or no involvement in the fraud.” Farnood and Ferozi got five-year sentences and a request to return the stolen money. They were convicted of a “breach of trust,” a crime they had not even been charged with. The court did not convict them of money laundering, which would have come with a court order to seize the money from their offshore accounts. Some of the staffers convicted had long since fled Afghanistan. Massoud Ghazi, the quiet accountant plunged into the whirlpool of New Kabul Bank, received a three-year sentence. Fitrat got convicted of misusing authority and intentionally failing to share information, which earned him a two-year prison term, a sentence he had no intention of serving. When I spoke to him on the phone not long after the verdict, he called it a “mockery of justice.”
“The president and his clique wanted to shift the blame [onto] the Central Bank, acquit themselves and their families of wrongdoing, and find someone responsible,” he said. “And those people were from the Central Bank, not the actual thieves: the president and his brother.”
Fitrat’s habit of following rules, and his insistence on consequences for the bank’s criminals, struck some of his colleagues as naïve. “Since he’d come from the U.S., he kind of had the U.S. mentality,” said Mustafa Massoudi, who ran the Afghan government’s financial intelligence unit. “We are in Afghanistan; do like Afghans do. You basically cannot always play by the rules. Relationships matter more. If you want to get things done, and you know how powerful these people are, you can’t tell the president, ‘All right, let’s sell the bank. Let’s kick these people out. Let’s put them in a court of law.’ That wasn’t an option. That antagonized the president.”
But the fact that Fitrat, and not Mahmood, ended up with a criminal conviction summed up how seriously Karzai’s palace took fighting the greed among his family members and supporters. Mahmood never got indicted in the United States, either. The covert plan that was kicked around to catch him in a bribe never happened, as that investigation got swamped by the scope of the Kabul Bank scandal. For Kirk Meyer, this was another dispiriting outcome of his lost war against corruption. He believed the U.S. government had more than enough evidence to arrest Mahmood. One simple way, Meyer believed, was to use IRS rules about reporting money in foreign banks, as Mahmood held money in an account in Dubai. The Kabul Bank case offered another chance: an American citizen involved in bank fraud overseas is still subject to arrest. Although in early 2013, Mahmood announced that he had revoked his American citizenship.
Among the embassy leadership, some believed that the federal prosecutors in the Southern District of New York were under political pressure not to indict Mahmood. Others felt that the complexity, and the foreignness, of this far-off war-zone scandal may have discouraged them from pursuing it. “We had enough information to put this guy away for a long, long time,” one top embassy official said.
Meyer expected an indictment, but months passed, and nothing materialized, despite his ever deeper excavations of Mahmood’s behavior.
“I think the U.S. government didn’t pursue it because they didn’t want to irritate President Karzai,” Meyer told me after he’d left Afghanistan. Even years later, talking about Afghanistan seemed to sting.
“The whole idea still bothers me,” he said. “We’re bankrupting ourselves on these two wars….Without a strong economy, you don’t have a national defense. That has to be an element in it. It can’t just be guns and bullets. I can’t say that we really protected that part of our national defense in these two wars.”
Meyer and Calestino fulfilled their mission. They were even nominated for a federal government award, the Samuel J. Heyman Service to America Medal, known as the “Sammies,” the Oscars for the federal bureaucracy. Their superiors praised them for discovering “extraordinarily rich information” that had “potential tentacles globally,” and the two men attended the black-tie gala in Washington, D.C. In the end they were just finalists. They didn’t win.
Credit 19.1
Frank Calestino, left, and Kirk Meyer, right, finalists for the Samuel J. Heyman Service to America Medal, a federal government award, in 2010
“We were asked: find out how bad the corruption is,” Meyer once told me. “When we found out, people didn’t want to know.”
20
EVIL IN HEAVEN
ONCE, AS I STEPPED OFF the airplane in Kandahar, there
was a crowd gathered on the tarmac. I was familiar with the celebrity politicians and warlords who could attract such attention, the men whose photos decorated car windows and billboards, the feared and revered and hated. In Kandahar, that would mean men like Ahmed Wali Karzai or, lately, his cousin Hashmat. I hadn’t noticed anyone like that on the flight.
I waited with the crowd to watch the rest of the passengers disembark. When a clean-cut elderly gentleman walked down the ramp, the crowd surged toward him, and the video cameramen jostled for position to capture his arrival. As he walked toward the terminal, people draped wreaths of colorful flowers around his neck. He was pale, with silver hair and glasses, and wore a banker’s suit. I figured he was some opium lord. I asked a man next to me, and he said it was the country’s most famous poet, the author of its national anthem. At that time, there was so much killing in Kandahar that people rarely left their homes without a good reason, particularly in the evening. The poet held a reading that night in the city, and more than a thousand people came to hear him.
His name was Abdul Bari Jahani, and one of his poems is called “Enmity in Heaven.” It tells the story of a mullah whose words could bring people to tears, who settled their disputes with justice and fairness. One day, the mullah spoke to his followers about hell—about its scorpions, snakes, and leaping flames; about how the punishment for missing one prayer meant getting dipped seventy thousand times into the never-ending fire; where sinners spent seventy years in a smoldering pit, but each year in hell equaled seventy thousand earth years; where every snake had seventy thousand heads, and every head seventy thousand fangs. Heaven, on the other hand, was a place of fresh fruit, cool shade, tall trees, pools of milk and juice and streams of wine. The righteous would receive castles made of gems hung with golden chandeliers and be presented with seventy long-necked statuesque virgins whose bodies were whiter than marble and hands as soft as silk, and seventy nymph boys who would serve them as slaves, each one more beautiful than a necklace of pearls.
A Kingdom of Their Own Page 46