Audit Says Kabul Bank Began as ‘Ponzi Scheme’ [View all]

[unhappycamper]

http://www.nytimes.com/2012/11/27/world/asia/kabul-bank-audit-details-extent-of-fraud.html?pagewanted=all



The chief judge in the Kabul Bank case, Shams Rahman Shams, at center behind desk, listened to a defense lawyer during a hearing this month. The United States has pressed for prosecutions.


Audit Says Kabul Bank Began as ‘Ponzi Scheme’
By MATTHEW ROSENBERG
Published: November 26, 2012

KABUL, Afghanistan — Kabul Bank became Afghanistan’s largest financial institution by offering the promise of modern banking to people who had never had a saving or checking account. What it really dealt in was modern theft: “From its very beginning,” according to a confidential forensic audit of Kabul Bank, “the bank was a well-concealed Ponzi scheme.”

Afghan and American officials had for years promoted Kabul Bank as a prime example of how Western-style banking was transforming a war-ravaged economy. But the audit, prepared this year for Afghanistan’s central bank by the Kroll investigative firm, gives new details of how the bank instead was institutionalizing fraud that reached into the hundreds of millions of dollars and obliterated Afghans’ trust after regulators finally seized the bank in August 2010 and the theft was revealed.

Going further than previous reports, the audit asserts that Kabul Bank had little reason to exist other than to allow a narrow clique tied to President Hamid Karzai’s government to siphon riches from depositors, who were the bank’s only substantial source of revenue.

At one point, Kroll’s investigators found 114 rubber stamps for fake companies used to give forged documents a more legitimate look. And the auditing firms used by the bank never took issue with loan books that were “almost entirely fraudulent,” Kroll found, recommending that the Afghan government explore suing the last such auditor, A.F. Ferguson & Co., a private Pakistani firm with a franchise under PricewaterhouseCoopers.



unhappycamper comment: If you were to read the article, you would find out 92% of the bank's funds ($861 million) went to 19 people and companies.