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The brother of Hamid Karzai is being investigated by a US grand jury over allegations of racketeering, extortion and tax evasion as he built a substantial business empire in Afghanistan.
Mahmoud Karzai has acquired stakes in mines, factories and property since his brother took power in 2001 and is currently embroiled in the near collapse of the country's biggest private bank. The second oldest of the Afghan president's six brothers is alleged to be a central figure in a business elite which has amassed fortunes through corruption and links to the government. Investigating the president's own brother represents a provocative attempt by US officials to rein in the graft many believe is undermining all attempts to build the Afghan state. As a dual Afghan-American citizen, Mahmoud Karzai may also face charges under federal laws prohibiting bribing officials in other countries, according to reports. Intelligence agents and tax investigators are said to be involved in the inquiry.
The grand jury operating behind closed doors will decide if there is enough evidence to prosecute. One senior official told the Wall Street Journal: "I think it's a question of when, not if. There's lots of evidence." Mahmoud Karzai has denied any wrongdoing and the president believes attempts to target his family are aimed at weakening him. Any prosecution in the United States would need to link the alleged crimes to America. Hank Asbill, Mr Karzai's Washington-based lawyer, said: "My client has not engaged in any wrongdoing and he is prepared to defend himself against the allegations." Until 2001, Mahmoud Karzai was a partner in a modest chain of family restaurants in America, but has risen to be one of Afghanistan's biggest businessmen. He is alleged to have bribed the ministry of mines to secure the country's only cement factory and also has stakes in the country's coal mines. He is the third biggest shareholder in Kabul Bank, which nearly collapsed in September when it was found to be riddled with off-the-books loans to the Afghan elite. Mr Karzai used a loan from the bank to buy his own seven per cent stake. The International Monetary Fund has said the bank, which receives most of the salaries for Afghan soldiers and police, is so crippled by bad debt it should be put into receivership to protect the financial sector. High-level corruption prosecutions inside Afghanistan have stalled after the president was angered by the arrest of Mohammad Zia Salehi, a powerful palace aide.
Hamid Karzai's brother under US grand jury investigation - Telegraph
Grand Jury Investigates Karzai Brother
KABUL—A U.S. federal grand jury is investigating allegations that Mahmood Karzai, a brother of Afghan President Hamid Karzai, engaged in racketeering, extortion and tax evasion while amassing a small business empire in Afghanistan.
U.S. officials in Kabul and Washington said a grand jury in the Southern District of New York is hearing evidence against Mahmood Karzai, offering the strongest indication to date that federal authorities are pushing ahead with an investigation that risks worsening already fragile relations between the U.S. and President Karzai's government.
Mahmood Karzai has hired a Washington criminal-defense attorney.
U.S. officials say any indictment against Mr. Karzai, a dual Afghan and American citizen, would likely represent their best chance to try a high-profile Afghan corruption case in an American court, sidestepping an Afghan justice system that has shown little inclination to tackle high-level graft.
Mr. Karzai, 53 years old, whose holdings range from a restaurant in Cambridge, Mass., to a stake in Afghanistan's troubled Kabul Bank to a housing development in the Taliban's southern Afghan heartland, has repeatedly denied allegations of any wrongdoing.
His attorney, Henry W. Asbill of Washington law firm Jones Day, said Tuesday that Mr. Karzai is ready to face any charges and would return to the U.S. to stand trial if any indictment came down while he was abroad.
Mr. Karzai has homes in Maryland, Dubai and Kabul. He is now in the U.S. to meet with his lawyers and tend to personal matters, Mr. Asbill said in a telephone interview. Mr. Asbill said neither he nor Mr. Karzai had received any formal notification of a grand jury, which isn't unusual. Mr. Asbill said he was hired by Mr. Karzai in October, after The Wall Street Journal first reported that that federal prosecutors in New York were investigating his client.
U.S. officials didn't say how long the grand jury has been hearing evidence and didn't say when, or if, prosecutors would call for a vote on an indictment.
How far off any indictment would be remains "the biggest question," said a senior U.S. official with knowledge of the grand jury and the broader investigation into Mr. Karzai. The probe involves U.S. law-enforcement and intelligence agents based in Kabul, along with officials from the Internal Revenue Service, officials said. The senior official added: "I think it's a question of when, not if. There's lots of evidence."
In one indication of how far the investigation had progressed, another U.S. official said the American Embassy in Kabul had requested that an anticorruption task force run by military officers at the U.S.-led coalition cut off any contact with Mr. Karzai because he was the focus of a federal inquiry. The request was made in the last quarter of 2010, the official said.
Neither the embassy in Kabul nor federal prosecutors in New York would comment on the grand jury or the investigation into Mr. Karzai. Under federal law, grand-jury proceedings aren't supposed to be publicized.
The senior U.S. official said that apart from trying to build a case on racketeering, tax-evasion and extortion charges, the investigation could also extend to violating federal laws that prohibit American citizens from passing bribes in other countries.
Afghan Investment Co., or AIC, of which Mr. Karzai is chief executive, is alleged to have bribed Afghanistan's then-mining minister to secure a lease on the country's only cement factory in 2006, other Afghan and Western officials have said. AIC was incorporated in Virginia until 2010, when it was dissolved and reincorporated in Afghanistan. Mr. Karzai has denied that any bribes were passed to secure the lease.
Even presenting the case to a grand jury carries significant political risks for the Obama administration at a crucial phase in the Afghan war. President Karzai has often complained that U.S. anticorruption efforts are primarily aimed at undermining his authority, and he was displeased when word of the federal investigation into his brother leaked out last year. An actual indictment, should one be handed down, would likely spark a major crisis, say Afghan officials close to the president. "I don't see how he could stand for that," said Afghan National Security Adviser Rangin Dafdar Spanta in an interview late last year. "It would be taken as an insult."
The frustration on the American side runs just as deep, with officials routinely complaining about what they see as a culture of impunity in Afghanistan, where corruption and insider dealing pervade the public and private sectors.
Indicting Mahmood Karzai would send a powerful message, some U.S. officials say.
Mr. Karzai's rise to the top of Afghanistan's clubby business elite—a group tied together by a seemingly endless web of formal and informal links—is often held up by Western officials as one of the clearest examples of the problem. His business interests include a 7% stake in Kabul Bank, Afghanistan's largest. The lender nearly collapsed in September after the central bank took it over amid allegations its owners used it as a piggy bank to make loans to themselves and to politically connected associates, many of which are still outstanding.
Among those loans was the money Mr. Karzai said he used to buy his stake in the bank, in which he is the third-largest shareholder. Mr. Karzai has said he is selling his interest in the cement factory to repay the loan. The bank is now the focus of parallel Afghan and U.S. investigations. Mr. Karzai has said he is ready to cooperate with the probes.
After bringing in Mr. Karzai, the bank won lucrative contracts from the government to handle more than $100 million a month in salary payments for 250,000 Afghan soldiers, police and teachers.
A team from the International Monetary Fund also just concluded an assessment of the fallout from the Kabul Bank crisis and broader problems in Afghanistan's poorly regulated banking industry.
The assessment was so "grim" that Afghanistan's IMF program could be suspended, said a Western diplomat and a central bank official with knowledge of the assessment.
That could jeopardize billions of dollars in annual assistance to Afghanistan. Most of the donor nations Afghanistan relies on to finance more than 70% of its annual budget and billions more in development programs have rules that require aid recipients to be in good standing with the IMF.
Neither Afghanistan's finance ministry nor its central bank immediately responded to requests to comment.
Grand Jury Investigates Karzai Brother - WSJ.com
Mahmoud Karzai has acquired stakes in mines, factories and property since his brother took power in 2001 and is currently embroiled in the near collapse of the country's biggest private bank. The second oldest of the Afghan president's six brothers is alleged to be a central figure in a business elite which has amassed fortunes through corruption and links to the government. Investigating the president's own brother represents a provocative attempt by US officials to rein in the graft many believe is undermining all attempts to build the Afghan state. As a dual Afghan-American citizen, Mahmoud Karzai may also face charges under federal laws prohibiting bribing officials in other countries, according to reports. Intelligence agents and tax investigators are said to be involved in the inquiry.
The grand jury operating behind closed doors will decide if there is enough evidence to prosecute. One senior official told the Wall Street Journal: "I think it's a question of when, not if. There's lots of evidence." Mahmoud Karzai has denied any wrongdoing and the president believes attempts to target his family are aimed at weakening him. Any prosecution in the United States would need to link the alleged crimes to America. Hank Asbill, Mr Karzai's Washington-based lawyer, said: "My client has not engaged in any wrongdoing and he is prepared to defend himself against the allegations." Until 2001, Mahmoud Karzai was a partner in a modest chain of family restaurants in America, but has risen to be one of Afghanistan's biggest businessmen. He is alleged to have bribed the ministry of mines to secure the country's only cement factory and also has stakes in the country's coal mines. He is the third biggest shareholder in Kabul Bank, which nearly collapsed in September when it was found to be riddled with off-the-books loans to the Afghan elite. Mr Karzai used a loan from the bank to buy his own seven per cent stake. The International Monetary Fund has said the bank, which receives most of the salaries for Afghan soldiers and police, is so crippled by bad debt it should be put into receivership to protect the financial sector. High-level corruption prosecutions inside Afghanistan have stalled after the president was angered by the arrest of Mohammad Zia Salehi, a powerful palace aide.
Hamid Karzai's brother under US grand jury investigation - Telegraph
Grand Jury Investigates Karzai Brother
KABUL—A U.S. federal grand jury is investigating allegations that Mahmood Karzai, a brother of Afghan President Hamid Karzai, engaged in racketeering, extortion and tax evasion while amassing a small business empire in Afghanistan.
U.S. officials in Kabul and Washington said a grand jury in the Southern District of New York is hearing evidence against Mahmood Karzai, offering the strongest indication to date that federal authorities are pushing ahead with an investigation that risks worsening already fragile relations between the U.S. and President Karzai's government.
Mahmood Karzai has hired a Washington criminal-defense attorney.
U.S. officials say any indictment against Mr. Karzai, a dual Afghan and American citizen, would likely represent their best chance to try a high-profile Afghan corruption case in an American court, sidestepping an Afghan justice system that has shown little inclination to tackle high-level graft.
Mr. Karzai, 53 years old, whose holdings range from a restaurant in Cambridge, Mass., to a stake in Afghanistan's troubled Kabul Bank to a housing development in the Taliban's southern Afghan heartland, has repeatedly denied allegations of any wrongdoing.
His attorney, Henry W. Asbill of Washington law firm Jones Day, said Tuesday that Mr. Karzai is ready to face any charges and would return to the U.S. to stand trial if any indictment came down while he was abroad.
Mr. Karzai has homes in Maryland, Dubai and Kabul. He is now in the U.S. to meet with his lawyers and tend to personal matters, Mr. Asbill said in a telephone interview. Mr. Asbill said neither he nor Mr. Karzai had received any formal notification of a grand jury, which isn't unusual. Mr. Asbill said he was hired by Mr. Karzai in October, after The Wall Street Journal first reported that that federal prosecutors in New York were investigating his client.
U.S. officials didn't say how long the grand jury has been hearing evidence and didn't say when, or if, prosecutors would call for a vote on an indictment.
How far off any indictment would be remains "the biggest question," said a senior U.S. official with knowledge of the grand jury and the broader investigation into Mr. Karzai. The probe involves U.S. law-enforcement and intelligence agents based in Kabul, along with officials from the Internal Revenue Service, officials said. The senior official added: "I think it's a question of when, not if. There's lots of evidence."
In one indication of how far the investigation had progressed, another U.S. official said the American Embassy in Kabul had requested that an anticorruption task force run by military officers at the U.S.-led coalition cut off any contact with Mr. Karzai because he was the focus of a federal inquiry. The request was made in the last quarter of 2010, the official said.
Neither the embassy in Kabul nor federal prosecutors in New York would comment on the grand jury or the investigation into Mr. Karzai. Under federal law, grand-jury proceedings aren't supposed to be publicized.
The senior U.S. official said that apart from trying to build a case on racketeering, tax-evasion and extortion charges, the investigation could also extend to violating federal laws that prohibit American citizens from passing bribes in other countries.
Afghan Investment Co., or AIC, of which Mr. Karzai is chief executive, is alleged to have bribed Afghanistan's then-mining minister to secure a lease on the country's only cement factory in 2006, other Afghan and Western officials have said. AIC was incorporated in Virginia until 2010, when it was dissolved and reincorporated in Afghanistan. Mr. Karzai has denied that any bribes were passed to secure the lease.
Even presenting the case to a grand jury carries significant political risks for the Obama administration at a crucial phase in the Afghan war. President Karzai has often complained that U.S. anticorruption efforts are primarily aimed at undermining his authority, and he was displeased when word of the federal investigation into his brother leaked out last year. An actual indictment, should one be handed down, would likely spark a major crisis, say Afghan officials close to the president. "I don't see how he could stand for that," said Afghan National Security Adviser Rangin Dafdar Spanta in an interview late last year. "It would be taken as an insult."
The frustration on the American side runs just as deep, with officials routinely complaining about what they see as a culture of impunity in Afghanistan, where corruption and insider dealing pervade the public and private sectors.
Indicting Mahmood Karzai would send a powerful message, some U.S. officials say.
Mr. Karzai's rise to the top of Afghanistan's clubby business elite—a group tied together by a seemingly endless web of formal and informal links—is often held up by Western officials as one of the clearest examples of the problem. His business interests include a 7% stake in Kabul Bank, Afghanistan's largest. The lender nearly collapsed in September after the central bank took it over amid allegations its owners used it as a piggy bank to make loans to themselves and to politically connected associates, many of which are still outstanding.
Among those loans was the money Mr. Karzai said he used to buy his stake in the bank, in which he is the third-largest shareholder. Mr. Karzai has said he is selling his interest in the cement factory to repay the loan. The bank is now the focus of parallel Afghan and U.S. investigations. Mr. Karzai has said he is ready to cooperate with the probes.
After bringing in Mr. Karzai, the bank won lucrative contracts from the government to handle more than $100 million a month in salary payments for 250,000 Afghan soldiers, police and teachers.
A team from the International Monetary Fund also just concluded an assessment of the fallout from the Kabul Bank crisis and broader problems in Afghanistan's poorly regulated banking industry.
The assessment was so "grim" that Afghanistan's IMF program could be suspended, said a Western diplomat and a central bank official with knowledge of the assessment.
That could jeopardize billions of dollars in annual assistance to Afghanistan. Most of the donor nations Afghanistan relies on to finance more than 70% of its annual budget and billions more in development programs have rules that require aid recipients to be in good standing with the IMF.
Neither Afghanistan's finance ministry nor its central bank immediately responded to requests to comment.
Grand Jury Investigates Karzai Brother - WSJ.com
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