No paperwork on near $500 million of Kabulbank loans

KABUL Sun May 29, 2011 5:16am EDT

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KABUL May 29 (Reuters) - A failed Afghan bank doled out nearly half a billion dollars in unsecured, undocumented loans to a roster of Kabul's elite, including sitting cabinet ministers and a powerful former warlord, anti-corruption officials said on Sunday.

Azizullah Luddin, chairman of the High Office of Oversight and Anti-corruption, also said that records suggested the government would only be able to get back around two thirds of Kabulbank's $925 million in outstanding loans.

"We are sure that $347 million will be paid back which we have no worries about," he told a news conference to release the findings of a report detailing the bank's woes.

"Other borrowers have properties in Dubai and in Kabul and in case they aren't able to pay back, we can get $200-$250 millions by selling them...So we can get back a possible total of around $600 million," he added.

The bank, whose major shareholders had close family ties to Afghanistan's leadership, came to the brink of collapse last year and was taken over by the Central Bank.

The Afghan government has since pledged to dismantle it, to meet International Monetary Fund requirements on financial standards, but progress has been very slow.

Ludin said three or four sitting cabinet ministers, several MPs and Abdul Rashid Dostum, a power broker and former warlord, were among the names on a list of debtors who had evaded usual banking standards to secure a loan.

"$467 million dollars has been paid out without any documents or any guarantees or papers," Ludin said.

"We might be able to get back large amount of this money because we have prepared a list of 207 borrowers," he said.

Dostum owed around $1 million to the bank, he added,

But both Ludin and Yasin Usmani, chairman of the Anti-Corruption Monitoring and Evaluation Committee, placed most of the blame for Kabulbank's failure at the door of the Central Bank, rather than with Kabulbank's owners and top managers.

These include Mahmoud Karzai, brother of President Hamid Karzai, and Mohammad Haseen, brother of the deputy president.

Ludin said Afghanistan's intelligence agency had warned the Central Bank months ago there were major problems in Kabulbank's finances, but had been told that it was not their business.

Individuals in the financial sector also tried to raise a red flag with the auditors, Usmani said.

"We blame the Central Bank because their monitoring was very weak," he said, adding that he thought all private banks in Afghanistan needed more rigorous checks.

The 30-page report, which Ludin waved around during the news conference, has been delivered to President Karzai and the Attorney General. They will decide whether to release it to the public and whether to pursue any prosecution, he said.

The tangled state of the bank's finances was evident even at the news conference, where officials gave figures $13 million apart for the total amount of loans outstanding.

They later explained the higher figure came from an updated calculation of interest due. But other figures for the amounts repaid and still outstanding, and summaries of different types of loan, had discrepancies of several million dollars. (Editing by Nick Macfie)

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