KABUL-- The top two officials of Kabul Bank used fake names, forged documents, fictitious companies and secret records as part of an elaborate ruse to funnel hundreds of millions of dollars to shareholders and top Afghan officials, according to newly obtained documents and interviews.The scheme overseen by Sherkhan Farnood, the bank's former chairman, and Khaililullah Frouzi, the chief executive, helped to cover up a vast disbursal of funds to Afghanistan's ruling elite, the documents and interviews with bank insiders as well as U.S. and Afghan officials show. Among the major recipients was Mahmoud Karzai, the president's brother, who allegedly received $22Â million in loans; some parliament members, warlords and cabinet ministers, including Mohammed Fahim, Afghanistan's first vice president, are alleged to have received smaller sums.
The documents, from the Afghan government and from the bank, provide the most detailed account yet of how the fraud was carried out in the years before it was discovered in 2010, forcing the Afghan government to take over the bank, split it in two, dissolve the shareholders' assets and spend more than $800Â million to bail it out.
The crisis at Kabul Bank has shaken confidence in Afghanistan's financial system and caused the lapse of the International Monetary Fund's line of credit, which has stymied tens of millions of dollars of foreign aid to the country. Now the job of recovering as much as possible of the $912Â million in loans amounts to perhaps the most serious task for President Hamid Karzai's government outside of fighting the Taliban.
Without a successful resolution of Kabul Bank's problems, said one senior U.S. official, Afghanistan could face "the collapse of the banking sector."
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