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The Great Afghan Corruption Scam

Corruption in today's Afghanistan has roots in Operation Enduring Freedom.

| Tue Apr. 2, 2013 2:33 PM EDT

This process became an important element in systematic graft on a grand scale triggered by the $60 billion a year that the Pentagon was, by 2009, spending on its Afghan War.

Then there were the petty bribes that ordinary Afghans regularly pay to civil servants and policemen. These are extracted from citizens for favors or preferential treatment by officials in public service ministries when it comes to such basics as gaining entrance to school for a child, securing a bed in a hospital, or getting a driver's license or building permit. They represent a commonplace phenomenon not just in Afghanistan, but also elsewhere in South and Southwest Asia.

While ignoring Pentagon-financed sleaze on an industrial scale, the NGOs and UNDOC go through the ritual of quantifying corruption in the country by questioning a sample of Afghans regarding the small bribes—popularly called baksheesh (literally, "gratuity")—they pay to public officials. They come up with such earth-shaking conclusions as that 50% of the population paid a bribe in 2012, "down" from 58% in 2009 (the year of the previous survey).

A 2009 survey by Integrity Watch Afghanistan (IWA) focusing on petty or administrative corruption put the total for such bribery nationally at $1 billion—less, that is, than half the $2.16 billion that the Pentagon disbursed in a single gigantic contract under the label of "Host Nation Trucking" for ferrying supplies to its bases.

Soaking the Pentagon-funded Security Forces

Another major source of systematic corruption: the filching of Pentagon money via salaries paid to "ghost soldiers" and policemen, recruits enrolled in the Afghan security forces who don't exist. Here, too, Washington's funds became the basis for embezzlement and "Afghan" corruption.

Up to 90% of Afghan troops and police are illiterate, and about a quarter of the force deserts annually. This has provided rich opportunities for commanders to pad their lists of soldiers with so-called ghosts, keep them on the books, and pocket their salaries. (It is worth recalling that this practice became similarly widespread in the South Vietnamese army during the American war in Vietnam.)

Besides filching salaries, enterprising police and army commanders have made money by reselling Pentagon war materials. For instance, according to documents leaked by the whistle-blowing website WikiLeaks, a police chief in the eastern town of Zurmat reported fictitious firefights with the Taliban, and upon being restocked with thousands of rounds of ammunition, sold them to a bazaar merchant. Another provincial police commissioner purloined food and uniforms, while leaving his men cold and underfed in the winter. Such acts led to the creation of a significant black market in US military equipment and goods of every sort.

In its drive to win the hearts and minds of Afghan villagers, the Pentagon's policymakers also gave cash directly to US officers to fund the building of wells, schools, and health clinics in areas where they were posted. The stress was on quick, visible results—and they were indeed quick and visible: the funds generally ended up in the pockets of rural power brokers with little oversight and no accountability, particularly when the American officer involved usually left the area after a relatively brief tour of duty.

Later, the State Department's Agency for International Development (USAID) took over this role. As with the Pentagon, most of the money it distributed ended up in the pockets of those local power brokers. By some accounts, USAID lost up to 90 cents of each dollar spent on certain projects. According to a Congressional report published in June 2011, much of the $19 billion in foreign aid that the US pumped into Afghanistan after 2001 was probably destabilizing the country in the long term.

Staggering amounts of US taxpayer dollars allocated to aid Afghanistan were spent so quickly and profligately that they circumvented any anti-corruption, transparency, or accountability controls and safeguards that existed on paper. However, those who amassed bagsful of dollars faced a problem. Afghanistan's underdeveloped $12 billion economy—a sum Washington spent in that country in a single month in 2011—did not offer many avenues for legitimate profitable investment. Therefore, most of this cash garnered on a colossal scale exited the country, large parts of it ending up in banks and real estate in the Gulf emirates, especially freewheeling Dubai.

US Diplomats Ignored Kabul Bank Shenanigans

Kabul Bank caught the essence of all this in a single Afghan institution, the brainchild of an Afghan who stood out as a man for all seasons. In their enthusiasm to welcome the founding of an ambitious private bank, American officials, wedded to their free market theology, overlooked the shady background of Kabul Bank Chairman Farnood. An ethnic Uzbek, he moved to Moscow during the Soviet occupation of Afghanistan in the 1980s. Toward the end of that decade, he started an informal money transfer business or hawala that would prove useful for drug smugglers who wanted to transfer their cash into Afghanistan and the adjoining Socialist Republic of Tajikistan.

Before the Russian authorities shut down his outfit for money laundering in 1998, Farnood escaped to Dubai. As the main hub of the hawala business covering Afghanistan, Tajikistan, and the Indian subcontinent, it was a perfect refuge for him. There he also became known as a sharp poker player.

The Russian interior ministry pursued him, but by 2007, when it got Interpol to issue an arrest warrant for him, he was the honorable chairman of Kabul Bank (with his former bodyguard, Ferozi, as its chief executive officer). And his bank had acquired nearly a million customers, including 250,000 Afghan security soldiers and policemen. Unsurprisingly, the interior ministry in Kabul ignored the Interpol warrant. So apparently did the US Embassy in Kabul.

When news of his jaw-dropping embezzlement and Ponzi scheme broke in September 2010, USAID officials expressed surprise and shock. They would have had to be blind and deaf not to have seen or heard the dark rumors about their star financial institution that had already been swirling around Kabul's diplomatic and financial circles. They could not, however, maintain the charade of ignorance once WikiLeaks published Kabul embassy cables, some of them dating from 2009, mentioning the bank's scandalous transgressions.

By September 2010, almost $1 billion had gone missing from the bank, with Farnood and Ferozi pocketing $900 million, significant amounts of which they invested in luxurious villas in Dubai. Last month, a few liberal Western journalists made a point of the way Afghan judges had dropped the most serious charges of embezzlement, forgery, and money laundering against Farnood and Ferozi, convicting them instead of "breach of trust." However, none of the journalists or commentators pointed out the inconvenient fact that US officials had heartily approved of the bank's founding, had helped raise its stature and improve its cash flow, and had later overlooked the egregious misdeeds of its prime founders.

In the next two years, as Washington draws down its forces in Afghanistan and the situation there disintegrates further, there will undoubtedly be more stories about "Afghan" corruption. Given that, it's well worth recalling the following facts: it was the US that flooded the country with military and aid funds, while expediently skipping any process of oversight, and so turned Operation Enduring Freedom into Operation Enduring Corruption.

Dilip Hiro, a TomDispatch regular, is the author of 33 books, the most recent being Apocalyptic Realm: Jihadists in South Asia (Yale University Press, New Haven and London).

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