The Afghanistan Papers

by Craig Whitlock

  Two months passed before the Afghan elections commission released a final vote count. Karzai led the field with 49.67 percent of the vote—just shy of the 50 percent threshold necessary to avoid a runoff.

  Few people believed the numbers. Karzai claimed he had won a majority and resisted a runoff. His opponents accused him of industrial-level fraud. U.S. officials desperately tried to negotiate a way out of the crisis. Eventually, Karzai was declared the winner, by default, after his chief rival withdrew.

  But the hard feelings persisted.

  Prior to his inauguration in November, Karzai invited PBS into the palace for a television interview. He accused the United States of abandoning Afghanistan after the Soviet withdrawal in 1989 and said he was worried it might happen again. “We keep hearing assurances from the United States, but we are, like, once bitten, twice shy. We have to watch and be careful.”

  Around the same time, Eikenberry sent a cable to Hillary Clinton that raised further doubts about the wisdom of counting on Karzai as a strategic partner. “It strains credulity to expect Karzai to change fundamentally this late in his life and in our relationship,” Eikenberry wrote. Though the cable was classified, someone leaked it to The New York Times.

  Karzai’s public criticisms became increasingly inflammatory and conspiratorial. In a speech in April 2010, he blamed the fraud-ridden presidential election on “foreigners,” whom he accused of trying to discredit him. A few days later, in a meeting with Afghan lawmakers, he threatened to join the Taliban if outsiders didn’t stop pressuring him.

  Marc Grossman, who served as the U.S. special representative to Afghanistan and Pakistan from 2011 to 2012, said Karzai’s outbursts served his own narrow interests, but drove the Obama administration up a wall. “He used erratic behavior as a technique,” Grossman said in a diplomatic oral-history interview. “It is how he kept everybody else off balance. He was extremely effective at it, even though there were times when we’d be tearing our hair out.”

  I. The U.S. military kept the full investigative report a secret until USA Today sued the Defense Department in 2018 to obtain almost 1,000 pages of files. The newspaper published an exposé of the Azizabad attack in December 2019.

  CHAPTER FIFTEEN Consumed by Corruption

  Hamid Karzai’s fraudulent reelection worsened a deluge of corruption that engulfed Afghanistan in 2009 and 2010. Dark money cascaded over the country. Money launderers lugged suitcases loaded with $1 million, or more, on flights leaving Kabul so crooked businessmen and politicians could stash their ill-gotten fortunes offshore. Much of the money landed in the emirate of Dubai, where Afghans could pay cash for Persian Gulf luxury villas with few questions asked.

  Back home, mansions known as “poppy palaces” rose from Kabul’s rubble to house opium kingpins and warlords. The garish estates featured pink granite, lime marble, rooftop fountains and heated indoor pools. Architects concealed wet bars in basements to avoid detection by judgmental mullahs. Some poppy palaces rented for $12,000 a month—an incomprehensible sum to impoverished Afghans who lived hand-to-mouth.

  In August 2010, Afghanistan’s largest private bank liquefied into a cesspool of fraud. Nearly $1 billion in falsified loans—equivalent to one-twelfth of the country’s economic output that year—disappeared into the pockets of politically connected investors who had run the bank as a pyramid scheme. Panic ensued as ordinary Afghans mobbed bank branches to withdraw their savings.

  Washington had worried for years about corruption’s hold on Afghanistan. But as the graft spread, Obama administration officials feared it would jeopardize their war strategy at the worst possible time—while American troops surged into Afghanistan. In public, U.S. officials promised to stamp out the affliction and hold Afghan leaders accountable.

  “I want to be clear: We cannot turn a blind eye to the corruption that causes Afghans to lose faith in their own leaders,” Obama declared in March 2009 when he announced an expansion of the war. “We will seek a new compact with the Afghan government that cracks down on corrupt behavior.”

  A few days later, Secretary of State Hillary Clinton said, “Corruption is a cancer as dangerous to long-term success as the Taliban or al-Qaeda.”

  In August 2009, Army Gen. Stanley McChrystal warned: “Malign actions of power brokers, widespread corruption and abuse of power… have given Afghans little reason to support their government.”

  But the rhetoric proved hollow. U.S. officials backed off and looked away while the thievery became more entrenched than ever. They tolerated the worst offenders—politicians, warlords, drug traffickers, defense contractors—because they were allies of the United States. Ultimately, they judged that Afghanistan’s entire power structure was so dirty that cleaning it up was mission impossible.

  Like the Bush White House, the Obama administration failed to confront a more distressing reality. Since the 2001 invasion, the United States had fueled the corruption by dispensing vast sums of money to protect and rebuild Afghanistan with no regard for the consequences. Limitless opportunities for bribery and fraud arose because U.S. spending on aid and defense contracts far exceeded what indigent Afghanistan could digest.

  “The basic assumption was that corruption is an Afghan problem and we are the solution,” Barnett Rubin, the State Department adviser, said in a Lessons Learned interview. “But there is one indispensable ingredient for corruption—money—and we were the ones who had the money.”

  Ryan Crocker, who served as the top U.S. diplomat in Kabul under both Bush and Obama, said the gusher of contracts to support U.S. and NATO troops in Afghanistan virtually guaranteed that extortion, bribery and kickbacks would take root. He said corruption became so widespread that it presented a bigger threat to the U.S. mission than the Taliban.

  “Our biggest single project, sadly and inadvertently, of course, may have been the development of mass corruption,” Crocker said in a Lessons Learned interview. He called it “the ultimate point of failure for our efforts.”

  Americans found it easy to blame the Afghans for being on the take, but U.S. officials had soiled hands as well. As soon as the war started in 2001, they embraced bribery as a tactic when it suited their purposes.

  To purchase loyalty and information, the CIA funneled cash to warlords, governors, parliamentarians, even religious leaders. The U.S. military and other agencies also abetted corruption by doling out payments or contracts to unsavory Afghan power brokers in a misguided quest for stability.

  In 2002 and 2003, when Afghan leaders convened a traditional assembly to write a new constitution, the U.S. government gave “nice packages”—stacks of currency—to delegates who supported Washington’s preferred stance on human rights and women’s rights, according to an unnamed German official who served in Kabul at the time. “The perception that was started in that period: If you were going to vote for a position that [Washington] favored, you’d be stupid not to get a package for doing it,” the German official said in a Lessons Learned interview.

  By the time Afghanistan held elections in 2005 to choose 352 members of parliament, that perception had hardened. Lawmakers realized their votes could be worth thousands of dollars to the Americans, even for legislation they would have backed anyway, the German official said.

  “People would tell each other, so-and-so has just been to the U.S. Embassy and got this money. They said, ‘Okay now I need to go,’ ” the German official said. “So from the beginning, their experience with democracy was one in which money was deeply embedded.”

  By 2006, the Afghan government had “self-organized into a kleptocracy” under which people in power could plunder the economy without restraint, according to Christopher Kolenda, an Army colonel who advised several U.S. commanders during the war.

  “The kleptocracy got stronger over time, to the point that the priority of the Afghan government became not good governance but sustaining this kleptocracy,” Kolenda said in a Lessons Learned interview. “It was through sheer naivete, and maybe care
lessness, that we helped to create the system.”

  Kolenda said U.S. officials failed to recognize the lethal threat that corruption posed to their war strategy. “I like to use a cancer analogy,” he said. “Petty corruption is like skin cancer; there are ways to deal with it and you’ll probably be just fine. Corruption within ministries, higher level, is like colon cancer; it’s worse, but if you catch it in time, you’re probably okay. Kleptocracy, however, is like brain cancer; it’s fatal.”

  By allowing corruption to fester, the United States helped destroy the legitimacy of the wobbly Afghan government they were fighting to prop up. With judges and police chiefs and bureaucrats extorting bribes, many Afghans soured on democracy and turned to the Taliban to enforce order.

  In 2009, U.S. military commanders belatedly started a campaign to root out corruption and clean up the Afghan government as part of the Pentagon’s enhanced counterinsurgency strategy. The awakening frustrated many U.S. civilian officials who felt the uniformed brass had downplayed the problem since the start of the war.

  “It was like they just discovered something new about the pernicious effects of corruption,” an unnamed former National Security Council staffer said in a Lessons Learned interview. For years, “people in the field would be moaning and groaning over the compromises made by the military on working with corrupt actors but they would be shut down.”

  The U.S. government mobilized a small army of anti-corruption lawyers, advisers, investigators and auditors to go to Kabul. What they found overwhelmed them.

  The single biggest generator of corruption was the U.S. military’s sprawling supply chain. The Pentagon paid Afghan and international contractors to deliver between 6,000 and 8,000 truckloads of fuel, water, ammunition, food and other supplies to the war zone each month.

  Transportation costs were exorbitant. Most convoys had to travel about 900 miles from the nearest seaport at Karachi, Pakistan, to reach the main Khyber Pass border crossing at Torkham. Then they had to cross patches of hostile Afghan territory to reach U.S. bases scattered throughout the country.

  A convoy of 300 trucks typically required 500 armed guards as basic protection. On top of that, trucking companies paid fat bribes to warlords, police chiefs and Taliban commanders to guarantee safe passage through their turf. A 2010 congressional report called the system “a vast protection racket” that was underwritten by U.S. taxpayers.

  Gert Berthold, a forensic accountant who served on a military task force in Afghanistan from 2010 to 2012, helped analyze 3,000 Defense Department contracts worth $106 billion to see who was benefiting. The task force concluded that about 18 percent of the money went to the Taliban and other insurgent groups. “And it was often a higher percent,” Berthold said in a Lessons Learned interview. “We talked with many former [Afghan] ministers, and they told us, ‘You’re underestimating it.’ ”

  The task force estimated that corrupt Afghan officials and criminal syndicates skimmed off another 15 percent. Berthold said the evidence was so damning that few U.S. officials wanted to hear about it. “No one wanted accountability,” he said. “If you’re going to do anti-corruption, someone has got to own it… No one is willing to own it.”

  Thomas Creal, another forensic accountant on the military task force, said U.S. agencies hesitated to take action for different reasons. The CIA didn’t want to antagonize Afghan contractors or strongmen who were on the spy agency’s payroll. Military commanders had mixed feelings about picking fights with crooked Afghan allies.

  Creal said he brought cases to the U.S. embassy in Kabul to see if the Justice Department could initiate civil court proceedings to seize assets from corrupt defense contractors, but rarely got anywhere. “We got visibility on the flow of money, then the question was, what do we do with that?” he said in a Lessons Learned interview. “The political world gets in the way.”

  Even attempts to mildly punish those involved ran into resistance.

  One year during Obama’s first term in office, diplomats drew up a blacklist of “Afghan malign actors” and proposed to disinvite them from the annual Fourth of July party at the U.S. embassy. But other officials pushed back. There was “always a reason as to why someone couldn’t be put on the list,” an unnamed U.S. official said in a Lessons Learned interview. In the end, the embassy excluded only one person from the party.

  “It was too late, the system was too entrenched,” an unnamed senior U.S. diplomat said in a separate Lessons Learned interview.

  * * *

  In January 2010, Afghan anti-corruption agents trained by the United States raided the headquarters of the New Ansari Money Exchange, one of the country’s largest financial institutions, and carted away tens of thousands of documents.

  U.S. officials suspected the politically connected network was laundering money for narcotics traffickers and insurgents by transporting piles of cash to Dubai and other foreign destinations. Investigators calculated that New Ansari couriers moved as much as $2.78 billion out of the country between 2007 and 2010.

  According to Army Lt. Gen. Michael Flynn, the U.S. and NATO military intelligence chief in Afghanistan at the time, U.S. forces played a pivotal role in the raid and pored over the seized documents and data.

  “We literally went there and surrounded the bank and had a standoff. We took all of the data,” Flynn said in a 2015 Lessons Learned interview. “It was huge. I thought it was a huge success. We conducted that raid and in three days, we did a lot of exploitation. We brought in like forty-five people from around the country very quietly.”

  “New Ansari was just incredibly corrupt,” he said. “It had double books and people were just stealing us blind.”

  U.S. officials assumed that the huge cache of incriminating evidence would lead to prosecutions. But the Afghan criminal investigation soon hit a wall. “Was anyone held accountable?” Flynn asked. “No, no one was held accountable.” I

  The wall was inside the presidential palace.

  Months after the raid, investigators wiretapped a conversation in which a senior aide to Karzai allegedly agreed to block the New Ansari probe in exchange for a bribe. Afghan law-enforcement agents arrested the aide, Mohammad Zia Salehi, in July 2010. Within hours, however, Karzai personally intervened and ordered Salehi’s release from jail, declaring that investigators had overstepped their authority. The Afghan government later dropped all charges. Once again, the Obama administration backed down while the U.S.-driven anti-corruption campaign faltered.

  “The pivot point was the Salehi case,” an unnamed Justice Department official based in Kabul at the time said in a Lessons Learned interview. He said the arrest provoked “a hornet reaction” by the presidential palace, which ordered Afghan law enforcement agents to stop cooperating with the Americans. Gert Berthold, the forensic accountant, added, “The interest and enthusiasm seemed to be lost after Salehi.”

  The Afghan president posed a bigger problem. Karzai resented the U.S. anti-corruption push and saw it as foreign meddling. After his reelection fight, he was in no mood to appease the Americans. The Afghan attorney general, appointed by Karzai, blocked numerous public corruption investigations.

  Some U.S. officials fumed and said it was time for a reckoning. Others argued that it was more important to mollify Karzai and maintain his waning support for U.S. and NATO military operations.

  Colonel Kolenda said some Obama administration officials regarded corruption as “annoying” and less of a concern than the need to strengthen the Afghan security forces and degrade the Taliban. But soon after Salehi’s catch and release, an even bigger scandal tested the Obama administration’s equivocal stance on corruption.

  One day that summer, a world-class poker player named Sherkhan Farnood paid a clandestine visit to the U.S. embassy in Kabul. In addition to his gambling talents, Farnood was the chairman of Kabul Bank, the largest private financial institution in the country. The 49-year-old had started the company six years earlier when Afghanistan was a banking desert, wi
th no regulated lenders.

  Kabul Bank grew swiftly thanks to a brilliant marketing campaign. Instead of paying interest, the bank handed out lottery tickets. Customers who deposited $100 received a one-time chance to win prizes ranging from clothes washers to new cars and apartments. The monthly lottery became a roaring success and Kabul Bank opened branches throughout Afghanistan.

  The banking business turned Farnood into a tycoon. He splurged on real estate in Dubai, acquired a private Afghan airline and became a fixture at casinos in Las Vegas, London and Macau. “What I’m doing is not proper, not exactly what I should do. But this is Afghanistan,” he once bragged to a Washington Post reporter.

  But when Farnood entered the U.S. embassy compound in July 2010, he carried a cache of documents that exposed Kabul Bank as a teetering house of cards. A small group of Kabul Bank shareholders—including Farnood—had loaned themselves hundreds of millions of dollars by tapping deposits belonging to their lottery-crazed customers. Most of the money had disappeared and the bank was about to go under. Farnood had become enmeshed in a power struggle with the bank’s co-owners. He told U.S. diplomats that he wanted to blow the whistle on the whole operation.

  U.S. officials panicked over Farnood’s revelations. If the bank failed, the losses could capsize the Afghan financial system and ignite a popular revolt. Kabul Bank served as the payroll agent for the Afghan government by handling accounts for 250,000 soldiers, police officers and civil servants. Many stood to lose their savings.

  There was also the risk of a political meltdown. Farnood’s documents underscored the degree to which the Karzai family and other Afghan elites were deeply entwined in Kabul Bank’s operations and ownership structure.

  Kabul Bank’s third biggest shareholder was Mahmoud Karzai, the president’s older brother. Another major shareholder was Haseen Fahim, the brother of Gen. Mohammed Fahim Khan, the Tajik warlord and Karzai’s running mate as vice president.II