Tomgram: Ann Jones, Playing the Game in Afghanistan
Posted on 03/09/2012 by Ann Jones
Ann Jones writes at Tomdispatch:
Green on Blue
Dead Americans, Dead Goats, and Half a Million Gunmen on the Loose By Ann Jones
Recent weeks have brought yet another sad chance to watch badly laid plans in Afghanistan go haywire. In three separate incidents, allies, most from the Afghan National Army (ANA), allegedly murdered six Americans — two of them officers in the high-security sanctum of Kabul’s Interior Ministry. Marine General John R. Allen, commander of U.S. and NATO forces in Afghanistan, even briefly withdrew NATO advisors and trainers from all government ministries for their own protection.
Until that moment, the Afghan National Army was the crown jewel of the Obama administration’s strategy for drawing down forces in Afghanistan (without really leaving). Trained in their hundreds of thousands over the past 11 years by a horde of dodgy private security contractors, as well as U.S. and NATO troops, the Afghan National Army is supposed to replace coalition forces any day now and defend its own country.
This policy has been the apex of Washington’s Plan A for some time now. There is no Plan B.
But what to make of the murders in the Ministry? An AP article headlined “Acts of Afghan Betrayal Are Poisoning U.S. War Plan” detected “a trend of Afghan treachery.” This “poisoning” is, however, nothing new. Military lingo has already long defined assaults on American and NATO soldiers by members of the Afghan National Security Force (a combination of the ANA and the Afghan National Police) as “green on blue incidents.” Since the military started recording them in May 2007, 76 NATO soldiers have been killed and an undisclosed number wounded in 46 recorded “deliberate attacks.”
These figures suggest more than a recent “trend of Afghan treachery” (though Afghans are increasingly blamed for everything that goes wrong in their country). Secretary of Defense Leon Panetta, who perversely called the latest green on blue incidents signs of Taliban “weakness,” told the press: “I’ve made clear and I will continue to make clear that, regardless of what the enemy tries to do to us, we are not going to alter our strategy in Afghanistan.”
This is, of course, the definition of paralysis in Afghanistan, so much easier in the short term than reexamining Plan A. In other words, as the American exercise in Afghanistan rolls ever closer to the full belly-up position, Plan A remains rigidly in place, and signals that, from Secretary Panetta and General Allen on down, Americans still don’t seem to get what’s going on.
Beware an Afghan Army
Many people who know Afghanistan well, however, have warned from the beginning against this plan to train up an armed force. I’m among the naysayers, and I’ll tell you why.
First, consider what the plan proposes. The number of Afghan soldiers and police to be trained varies widely from one report to the next, but the last estimate I received directly from the Kabul Military Training Center called for 240,000 soldiers and 160,000 police (who, incidentally, are also called “soldiers” and trained in a similar manner). That brings the total proposed Afghan National Security Force (ANSF) to approximately four times the number of current coalition troops in the country.
It costs the U.S. $12 billion annually to train the army alone and the estimated cost of maintaining it beyond 2014 is $4 billion per year, of which the Afghan government says it can pay no more than 12%. Clearly, Afghanistan does not need and cannot sustain such a security force. Instead, the United States will be stuck with the bill, hoping for help from NATO allies — until the force falls apart. How then did this security force become the centerpiece of the Obama plan? And given its obvious absurdity, why is it written in stone?
Second, take just a moment to do something Washington has long been adverse to — review a little basic Afghan history as it applies to Plan A. Start with the simplest of all facts: in the country’s modern history, no Afghan national army has ever saved a government, or even tried. More often, such an army has either sat on its hands during a coup d’état or actually helped to overthrow the incumbent ruler.
The chief judge in the Kabul Bank case, Shams Rahman Shams, at center behind desk, listened to a defense lawyer during a hearing this month. The United States has pressed for prosecutions. Bryan Denton for The New York Times
Afghan and American officials had for years promoted Kabul Bank as a prime example of how Western-style banking was transforming a war-ravaged economy. But the audit, prepared this year for Afghanistan’s central bank by the Kroll investigative firm [ http://www.kroll.com/ ], gives new details of how the bank instead was institutionalizing fraud that reached into the hundreds of millions of dollars and obliterated Afghans’ trust after regulators finally seized the bank in August 2010 [ http://www.nytimes.com/2010/09/01/world/asia/01kabul.html?pagewanted=all ] and the theft was revealed.
At one point, Kroll’s investigators found 114 rubber stamps for fake companies used to give forged documents a more legitimate look. And the auditing firms used by the bank never took issue with loan books that were “almost entirely fraudulent,” Kroll found, recommending that the Afghan government explore suing the last such auditor, A.F. Ferguson & Co. [ http://www.affco.com.pk/background%20navigation/index.html ], a private Pakistani firm with a franchise under PricewaterhouseCoopers [ http://www.pwc.com/us/en/index.jhtml ].
When Afghan regulators, aided by American officials, first discovered the extent of the fraud at the bank in the summer of 2010, “we never imagined that the criminality was as deep as it was, that it was so widespread and that it included high-ranking officials and their relatives,” said Abdul Qadeer Fitrat, at the time the governor of the Bank of Afghanistan [ http://www.centralbank.gov.af/ ], the country’s central bank.
“At the beginning, I received information from the U.S. Embassy that maybe $150 million or $200 million is gone in bad loans to powerful people,” he said. The number soon climbed close to $900 million, though “we did not know who took the loans and that they were all tied to a few individuals.”
What Kroll’s audit found is that on Aug. 31, 2010, the day the Bank of Afghanistan seized Kabul Bank, more than 92 percent of the lender’s loan portfolio — $861 million, or roughly 5 percent of Afghanistan’s annual economic output at the time — had gone to 19 related people and companies, according to the audit.
Among the largest beneficiaries were a brother of Mr. Karzai and a brother of First Vice President Muhammad Qasim Fahim [ http://topics.nytimes.com/topics/reference/timestopics/people/f/muhammad_fahim/index.html ] who each owned stakes in the bank that had been bought with loans from the bank, according to the audit and regulatory officials. For their part, both have insisted that they never took part in any fraud at the lender.
Reached for comment, Mr. Karzai’s spokesman, Aimal Faizi, stressed that the president considered the audit incomplete: Mr. Karzai still believes Kroll has to find out where all the missing money has gone, to which countries it was sent and to which accounts if the firm wants the report to be seen as credible, Mr. Faizi said.
The New York Times obtained a copy of the 277-page audit report, which Afghan and Western officials have confirmed was the one Kroll prepared.
The two men that Afghan prosecutors, Western officials and the Kroll audit accuse of profiting most from the fraud were the bank’s principal owners: Sherkhan Farnood, its chairman and a former World Series of Poker Europe winner, and his former bodyguard, Khalil Fruzi, who served as the bank’s chief executive.
Working with the bank’s executives, they devised simple, yet effective, schemes to fool weak and reluctant regulators, and the Americans who were advising them, the audit says.
The owners kept two sets of books, and hid loans to themselves and their shareholders by taking them in the names of friends, relatives and even domestic servants, according to the audit and Afghan officials. They grouped related loans together to better keep track of who owed what. Hundreds of millions of dollars in illicit loans were routed to Dubai through a money exchange controlled by Mr. Farnood, who founded the bank.
Kabul Bank employed people to forge documents for fictitious companies, which were then audited by accounting firms that appear to have been complicit, according to Kroll. That is where the rubber stamps came in: they bore the names of those false companies, like Abdul Mahmood Trading and Ali Jan Abdul Hadi Ltd., to lend an air of respectability to fake documents.
Toward the end, Mr. Fruzi even expensed foreign shopping sprees at stores like Louis Vuitton and Versace in Dubai and New Delhi. Mr. Farnood was snapping up villas in Dubai with bank money, though he has maintained they were investments gone bad, nothing more.
Bailing out depositors cost the cash-strapped Afghan government more than $825 million, and Afghan and Western officials say that only between $200 million and $400 million, depending on how assets are valued, has so far been recovered from shareholders.
For many Afghans, the scandal surrounding Kabul Bank, a linchpin of the economic order established here by Americans and their allies, has cemented the opinion that the United States brought crony capitalism, not free markets, to Afghanistan. The audit is likely to reinforce that view while raising potentially troubling questions about who is being prosecuted here in connection with the scandal, and who is not.
The United States and its allies have pressed hard for prosecutions, threatening to cut aid if no action was taken. The completion of the forensic audit, which was financed by international donors and delivered in March, was another demand by the international community, as was a separate report, due later this week, by an Afghan government-funded but largely independent corruption watchdog commission composed of Afghan and foreign experts.
Mr. Farnood and Mr. Fruzi top the list of 22 defendants charged so far, and both are on trial in Kabul. Many others on the list are Kabul Bank executives who are accused of helping to carry out fraud, though it is unclear whether they personally profited.
Few officials have any problem with those prosecutions. But there are questions about the charges brought by Afghan prosecutors against a few officials at Afghanistan’s central bank. Western officials, speaking on condition of anonymity, expressed worries that those cases appeared to be intended to end further investigation into Kabul Bank. Kroll has said it has no evidence that the Bank of Afghanistan’s staff members were complicit in Kabul Bank’s collapse.
In the most prominent such case, the former chairman of the Bank of Afghanistan, Abdul Qadeer Fitrat, has been indicted primarily for failing to warn the Afghan government about Kabul Bank and concealing the fraud there — an accusation that one Western official called “laughable.” Several Western and Afghan officials insist that Mr. Fitrat had actively pressed inquiries of Kabul Bank, and believed he had been indicted in order to scare him off. He fled the country last year.
Even Mr. Farnood said Mr. Fitrat had done nothing wrong: “Fitrat was the one person who was not involved in any bribing,” he said in a telephone interview.
The situation was particularly galling, the officials said, because apart from Mr. Farnood and Mr. Fruzi, the other “high-value beneficiaries” — each of whom still owes at least $5 million to the bank, Kroll estimates — have yet to face any legal action. That group includes Mahmood Karzai, the president’s brother, and Haseen Fahim, the vice president’s brother.
In an interview, Mahmood Karzai said he had repaid all the money he originally owed, an amount he put at $5.3 million. He insisted that Kroll had miscalculated and included assets he never owned, like a villa in Dubai, when it tallied his liability at $30.5 million.
He called Kroll “a piece of puke” and said it had relied too heavily on evidence provided by Mr. Farnood, who in the summer of 2010 began cooperating with American officials and, subsequently, Afghan investigators after a dispute with his fellow shareholders.
Neither Mr. Fahim nor Mr. Fruzi responded to phone messages seeking comment.
Kabul Bank did serve some legitimate functions — for instance, the United States paid the salaries of hundreds of thousands of soldiers, police and teachers through it.
But many of the bank’s practices seemed tailor-made to lure depositors by any means available. One popular gimmick detailed by the audit was known as a Bakht account, which offered those who opened them a chance to win houses, cars and jewelry at glitzy prize drawings.
The only real winners, however, were the bank’s senior managers and their friends, the audit found. The new depositors’ money was used principally “to provide free financing to the other business interests of senior management and a group of connected persons.”
Alissa J. Rubin and Sharifullah Sahak contributed reporting.
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