The Great Afghan Corruption Scam

The Great Afghan Corruption Scam: How Operation Enduring Freedom Mutated into Operation Enduring Corruption



America’s post-9/11 conflicts have been wars of corruption, a
point surprisingly seldom made in the mainstream media. Keep in mind
that George W. Bush’s administration was a monster of privatization. It
had its own set of crony corporations, including Halliburton, KBR, Bechtel, and various oil companies, as well as a set of mercenary rent-a-gun outfits like Blackwater,
DynCorp, and Triple Canopy that came into their own in this period. It
took the plunge into Iraq in March 2003, sweeping those corporations
and an increasingly privatized military in with it.

In the process, Iraq would become an example not of the free
market system, but of a particu-larly venal form of crony capitalism
(or, as Naomi Klein has labeled it, “disaster capitalism”).Add
in another factor: in the wake of the 9/11 attacks, the Bush
administration began pouring money into the Pentagon, into, that is, an
organization whose budget has never been able to pass an audit. There was so staggeringly much money to throw around then — and hubris to spare as well.

Among the first acts of L. Paul Bremer III, the new American proconsul in Baghdad, was the disbanding of
Saddam Hussein’s army (creating an unemployed potential insurgent
class) and the closing down of a whole range of state enterprises along
with the privatization of the economy (creating their unemployed foot
soldiers). All of this, in turn, paved the way for a bonanza of
“reconstruction” contracts granted, of course, to the administration’s
favorite corporations to rebuild the country. There were slush funds aplenty; money went missing without anyone blinking; and American occupation officials reportedly “systematically looted” Iraqi funds.

In April 2003, when American troops entered Baghdad, it was
already aflame and being looted by its own citizens. As it turned out,
the petty looters soon enough went home — and then the real looting of
the country began. The occupiers, thanks to the U.N., fully controlled
Iraq’s finances and no one at the U.N. or elsewhere had the slightest
ability to exercise any real supervision over what the occupation regime did or how it spent Iraq’s money. Via a document labeled “Order 17,”
Bremer granted every foreigner connected to the occupation enterprise
the full freedom of the land, not to be interfered with in any way by
Iraqis or any Iraqi political or legal institution. He gave them all,
that is, an official get-out-of-jail-free card.

Who could be surprised, then, that the massive corporate attempt to rebuild Iraq would result in a plague of overbilling, remarkable amounts of shoddy or useless work, and a blown $60 billion “reconstruction”
effort that would leave the country with massive unemployment and
without reliable electricity, water, or sewage systems? Could there be a
sadder story of how war making and corruption were being wedded on a
gigantic scale in an already fading new century? As it turned out, the
answer to that question was: yes.

Iraqi corruption was no anomaly of war, as TomDispatch regular Dilip
Hiro makes clear today. Just consider the way Washington turned the
“liberation” of Afghanistan into another field day for corruption.

Tom Dispatch Editor

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The Great Afghan Corruption Scam



How Operation Enduring Freedom Mutated into Operation Enduring Corruption



By Dilip Hiro

Washington has vociferously denounced Afghan corruption as a major
obstacle to the U.S. mission in Afghanistan. This has been widely
reported. Only one crucial element is missing from this routine censure:
a credible explanation of why American nation-building failed there. No
wonder. To do so, the U.S. would have to denounce itself.

Corruption in Afghanistan today is acute and permeates all sectors of
society. In recent years, anecdotal evidence on the subject has been
superseded by the studies of researchers, surveys by NGOs, and periodic
reports by the United Nations Office on Drugs and Crime (UNODC). There
is also the Corruption Perceptions Index of
the Berlin-based Transparency International (TI). Last year, it
bracketed Afghanistan with two other countries as the most corrupt on
Earth.

None of these documents, however, refers to the single most important
fact when it comes to corruption: that it’s Washington-based. It is,
in fact, rooted in the massive build-up of U.S. forces there from 2005
onward, the accompanying expansion of American forward operating bases,
camps, and combat outposts from 29 in 2005 to nearly 400 five years later, and above all, the tsunami of cash that went with all of this.

Last month, when an Afghan court sentenced Sher Khan Farnood and
Khalil Ullah Ferozi, the chairman and chief executive of the Kabul Bank,
for looting its deposits in a gigantic Ponzi scheme, the event received
some media attention. Typically, however, the critical role of the Americans in the bank’s murky past was missing in action.
Founded as a private company in 2004, the Kabul Bank was promptly hailed by American officials in Afghanistan as a linchpin
in the country’s emerging free market economic order. In 2005, action
followed words. The Pentagon, paymaster for the Afghan National Security
Forces (ANSF), signed a contract with the bank to disperse the salaries
of ANSF soldiers and policemen.

With that, the fledgling financial institution acquired an impressive
cash flow. Moreover, such blatant American support generated confidence
among better-off Afghans. Soon enough, they were lining up to deposit
their money. Starting in 2006, the surging inflow of cash encouraged
Farnood and Ferozi to begin skimming off depositors’ funds as unsecured
loans to themselves through fake front companies. Thus was born the
world’s largest banking scam (when calculated as a percentage of the
country’s gross domestic product) with the U.S. Embassy in Kabul acting
as its midwife.

How It All Happened

There exists a statistical connection between the sums expended by
Washington in Afghanistan and worsening corruption in that hapless
nation. It is to be found in the TI’s Corruption Index. In 2005,
Afghanistan ranked 117th among the 158 countries surveyed. By 2007, as
American greenbacks poured into the country, only two of 179 nations
surpassed it in corruption. Since 2011, it has remained at the very bottom of that index.

What changed between 2005 and 2007? By the spring of 2006, the
Taliban insurgency had already gained control of 20 districts in the
southern part of the country and was challenging U.S. and NATO forces in
the strategic Kandahar area. With a sectarian war by then raging in
U.S.-occupied Iraq, Secretary of Defense Donald Rumsfeld felt that he
could increase the American military presence in Afghanistan only
marginally.

This
started to change when Robert Gates took over at the Pentagon in
December 2006. He began bolstering U.S. combat units there. As a result,
forward operating bases multiplied, as did combat outposts and military
camps. Building new sites or upgrading old ones on the double meant
that the Pentagon started awarding contracts to local Afghan
construction companies unaccustomed to handling such tasks quickly.
They, in turn, subcontracted tasks out to those who greased their palms.
With the infusion of ever more piles of Pentagon dollars, corruption
only spread.

Later, each of these bases and outposts had to be supplied with food,
water, fuel, and other necessities as well as war materials. In
addition, the Pentagon accelerated its program of bolstering the nascent
Afghan security forces by covering the full cost of training,
equipping, and paying its personnel, as well as building bases and
outposts for them. As a consequence, contracts to Afghan transport
companies ballooned, as would contracts to Afghan private security
outfits to protect the trucks hauling provisions and materials in that
increasingly war-torn country.

So, of course, did the opportunities for graft.

Between 2005 and 2007, when American combat forces in Afghanistan doubled, the Pentagon’s budget for the Afghan War leaped
from $17.2 billion to $34.9 billion annually. ANSF personnel also
doubled, from 66,000 to 125,000 troops and policemen, though at a
relatively marginal cost to the Pentagon. At $16,000 a year, the burden of maintaining an Afghan soldier was a paltry 2% of the $800,000 it cost to maintain his American counterpart.

In this period, opportunities for corruption rose exponentially. Why?
In part, because the Pentagon was unable to protect the supply convoys
of its Afghan contractors, something that would have required tens of
thousands more U.S. troops. The distance between the main supply center
at Bagram Air Base near the capital Kabul and the city of Kandahar in
the Taliban-infested south was 300 miles; and the Taliban heartland in
Helmand Province lay another 100 miles from Kandahar. Since Afghanistan
lacks railroads, the only way to transport goods and people was to use
the roads.

The Bagram-Kandahar highway was peppered with roadblocks, each manned
by the armed fighters of the dominant warlord, who collected an
arbitrary “transit tax.” The only way the transport companies could
perform their job was by buying safe passage from the rulers of the
highway and so parting with bribes of approximately $1,500 per truck
between Bagram and Kandahar, and another $1,500 between Kandahar and
Helmand. All of this came from the cash the Pentagon was so
profligately doling out.

The warlords and private security contractors, in turn, gave bribes to the Taliban for the safe passage of these convoys. In essence, therefore, the Pentagon was helping finance
its enemy in order to distribute necessary supplies to its bases. In
addition, on “safe” roads, checkpoints were often manned by Afghan
policemen, who extorted bribes by threatening to pass advance
information about a convoy on to the Taliban.

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 U.S. 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 U.S. 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 U.S. pumped into Afghanistan after 2001 was
probably destabilizing the country in the long term.

Staggering amounts of U.S. 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.

U.S. 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 U.S. 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 U.S. 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 U.S. 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.


Source:-
http://www.globalresearch.ca/the-great-afghan-corruption-scam-how-operation-enduring-freedom-mutated-into-operation-enduring-corruption/5329446