The collapse of Kabul Bank in 2010 triggered a financial crisis, civil disorder and a run on deposits, worrying foreign donors and embarrassing the US and Afghan governments, which had touted its credentials as a modern lender integral to developing a tiny economy crippled by war and mismanagement.
The two former heads of the bank, founder Sher Khan Fernod and former Chief Executive Haji Khalil Ferozi, convicted of taking $810 million of the $935 million stolen, were both sent to jail for five years. The case was viewed as a crucial barometer of Afghanistan's commitment to stabilising the economy, less than two years before the withdrawal of most foreign troops and a winding down of billions of dollars in foreign aid. It appears to be the first major bank fraud trial in Afghan history.
Brothers of President Hamid Karzai and his first vice-president, Mohammad Qasim Fahim, who were both shareholders, were spared jail sentences in the rulings thanks to a presidential decree a year ago that granted immunity from prosecution to those who returned funds. "Ferozi and Fernod have been sentenced for five years each in jail for the theft of Kabulbank assets valued at $531 million and $279 million respectively," said Judge Shamsul Rahman Shams, head of a special court set up for the Kabul Bank investigation.
Those sentences were condemned as "relatively light" by the Independent Joint Anti-Corruption Monitoring and Evaluation Committee "given the extent of the fraud and sentences handed down to others who appear to have had little or no involvement in the fraud", a statement said. The remaining 18 men, four of whom are Indian nationals, received prison terms of four or five years.
A Western official in Kabul heralded the trial as a step in the right direction for the fledgling judicial system in Afghanistan, one of the world's most corrupt countries. "There's no precedent for anything like this. They did it, and that's pretty good," he said on condition of anonymity. All those convicted now face two more appeal trials if they decide to go through that process, which entails additional charges that could increase or decrease their jail sentences.