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April 27, 2011

Afghan banker calls for public trials in bank case



KABUL, Afghanistan (AP) — Afghanistan's top banker on Wednesday called for public trials for those responsible for the questionable lending and mismanagement that forced Kabul Bank into receivership.

Central Bank Governor Abdul Qadir Fitrat appeared in the Afghan parliament to answer questions from angry lawmakers about problems at Kabul Bank. They shouted and lobbed criticisms at Fitrat, accusing him of not monitoring the bank as its shareholders lent themselves millions to invest in businesses and property.

He defended the central bank's actions to address the problems at Kabul Bank after learning about them from news reports and he pledged to push for prosecutions of those responsible.

"Their actions had a very bad effect on the financial system of the country," Fitrat said. "That's why no one has the right to forgive any of them. They should be sentenced."

Fitrat has said that Kabul Bank made $579 million in loans — including questionable ones to the bank's shareholders and others. Adding tax and interest from the six years the bank has been open, the amount of the loans is estimated at $909 million, he said.

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.

About $50 million in loans — or about 5.5 percent — have been repaid since September when the central bank took control of Kabul Bank, Fitrat told the lawmakers. The bank, meanwhile, has been split into a "good bank" — now under the Afghan Finance Ministry — and a "bad bank."

The central bank gave the parliament a partial list of the money the bank lent to former shareholders, businessmen and others — some of which has already been repaid:

— $504 million to former bank chairman, Sherkhan Farnood, a world–class poker player who raised money for President Hamid Karzai's re–election campaign.

— $66.9 million to Khalilullah Ferozi, former chief executive officer of the bank.

— $22 million to Mahmood Karzai, a brother of Afghan President Hamid Karzai.

— $8.7 million to Hasseen Fahim, the brother of Afghanistan's first vice president, Mohammad Qasim Fahim.

Three businessmen and two unidentified individuals on the list received loans ranging from $7.39 million and $37 million.

Fitrat told the lawmakers that Farnood had not yet repaid any money, but had identified all his properties in Dubai, which soon would be in the control of the central bank. Farnood and Ferozi are not in detention, but cannot travel anywhere without telling authorities.

Sakrai Barakzai, a member of parliament from Kabul and wife of one of the businessmen who received loans from the bank, alleged that there were lawmakers who had received monetary gifts from the bank. She requested that the central bank disclose the names of any lawmakers or Afghan ministers who received "small or big money gifts" from Kabul Bank.

Under pressure from the international community, the central bank has strengthened its capacity to oversee and audit Afghan banks, Fitrat said.

Afghanistan is seeking fresh financial support from the International Monetary Fund after a $120 million IMF lending program expired in September. The IMF has been reluctant to extend new credit to Kabul until Afghan officials can show that they are doing enough to clean up problems in the country's banking system generally and Kabul Bank, in particular.

The absence of an IMF program makes it difficult for international donors to pump money into Afghanistan. The U.N. has said some $70 million in spending for government activities could be withheld without IMF support.

In Dubai on Wednesday, Masood Ahmed, the director of the IMF's Middle East and Central Asia department, said the fund met with Afghan officials earlier this month in Washington and have reached a preliminary agreement with them on most issues regarding IMF support. But more still needs to be done before the IMF will agree to further support.

"We will continue discussions in the coming weeks on the remaining aspects, including specific steps they need to take prior to this program being considered by our board of directors," he said in response to a question at a briefing to discuss the fund's regional economic forecast.

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AP Business Writer Adam Schreck in Dubai, United Arab Emirates, contributed to this report.



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