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Afghan court slaps prison time on Kabul Bank execs

KABUL, Afghanistan – An Afghan tribunal convicted two top executives from Kabul Bank and sentenced them to five-year prison terms on Tuesday for their role in a massive corruption scandal that led to the collapse of Afghanistan’s largest bank and threatened the country’s fragile economy.

Judge Shams-ul-Rahman Shams said the bank’s former chairman Sherkhan Farnood and former chief executive officer Khalilullah Ferozi were guilty of theft of $278 million and $530 million, respectively. Farnood and Ferozi have also been ordered to pay back these funds.

The two were among 21 Kabul Bank and government employees found guilty of wrongdoing on Tuesday.

The convictions were the first from the Kabul Bank debacle, which erupted in 2010 and in which $861 in fraudulent loans disappeared into the pockets of friends and relatives of the powerful men behind the bank.

“These 21 individuals are going to be sentenced because of their role in the Kabul Bank crisis,” Shams said, before reading out the list of names.

Among those convicted was the former chief of the country’s central bank, Abdul Qadeer Fitrat, who was sentenced to two years in prison for misusing his authority and failing to inform the government of what was going on inside Kabul Bank.

Notably absent from the list were some of the highest-profile names attached to the bank, such as shareholders Mahmoud Karzai, one of the Afghan president’s brothers, and Hassan Fahim, a brother of the country’s first Vice President Mohammad Qasim Fahim.

They were not included in this case but Shams said more than 20 people are still under investigation and more indictments may be forthcoming.

The bank’s collapse and subsequent bailout represents more than 5 percent of Afghanistan’s gross domestic product, making it one of the largest banking failures in the world.

An independent report issued last year said Kabul Bank was run like Ponzi scheme with deposits being used to fund lavish villas in Dubai and other luxury purchases. Hundreds of millions of dollars were sent out of Afghanistan – some in airplane food trays, according to the report.

The scandal has become a test case for President Hamid Karzai’s pledge to clean up the notoriously corrupt government. Karzai has been regularly accused of prosecuting low-level graft while ignoring massive thievery on the part of friends or powerful allies. Last year’s report by the Independent Joint Anti-Corruption Monitoring and Evaluation Committee said political interference has stymied much of the Kabul Bank investigation.

The Afghan government is almost entirely paid for by foreign donors, many of whom have threatened to pull or curtail financing if they do not see proof that the Karzai administration is assuring that funds reach Afghan citizens as intended.

The defendants have the option to appeal Tuesday’s decision by the three-judge panel, which is considered a primary court ruling.