Karzai’s brother used Kabul Bank funds to make a killing

Thursday, September 9, 2010

LONDON - Afghan President Hamid Karzai’s brother made a half-million pound profit in eight months on a high-end villa in Dubai bought with a loan from the troubled Kabul Bank.

Mahmoud Karzai, a high-profile businessman in Afghanistan, borrowed seven million UAE dirhams (1.23 million pounds) from Kabul Bank, in which he is also the third largest shareholder, in July 2007, the Daily Telegraph reported Thursday.

He used the money to buy a villa in Palm Jumeirah, the artificial island in the Gulf off the coast of Dubai. The seller was the bank’s former chairman, Sher Khan Farnood, who had used the bank to buy a 9.1 million pounds property portfolio in Dubai, which he registered in his own name.

Mahmoud Karzai sold the house eight months later for 10 million dirhams (1.76 million pounds), a profit of three million dirhams, or just over 500,000 pounds.

“Making a profit on a house is beautiful,” Karzai told the newspaper in an interview Wednesday. “I was so happy to make that profit.”

He said the question of whether it was a conflict of interest for a shareholder to be lent money to buy a property that was already financed by the bank should be referred to Farnood.

“In my opinion if you borrow money it’s not a major issue,” he said. “It’s not as if you are taking money for free. He lent it to me - you would have to ask him why he did that.”

Karzai said he had bought the house so that he could apply for a residency visa in Dubai, where his youngest daughter was about to enrol at a school.

The house deal is one of a series of loans made to Karzai and others by the Afghanistan’s largest bank. Its operations are now being examined by the Afghan Central Bank.

Western officials are said to be concerned about allegations that money spent on aid is ending up, via the bank’s depositors, in property speculation in places like Dubai rather than reinvested. Karzai has not been accused of any illegality.

Hundreds of millions of dollars have been withdrawn in a run on the bank by ordinary depositors since details of the investigation were revealed.

Filed under: Economy

will not be displayed