U.S. may indict Karzai's brother for tax evasion
Thursday, October 14, 2010
In a move that could further strain Washington's already fraught relations with Afghan President Hamid Karzai, federal prosecutors are considering an indictment against his brother for tax evasion, according to a U.S. official and a source familiar with the investigation.
The U.S. attorney's office in Manhattan, assisted by Internal Revenue Service agents and others, has been looking into the finances of President Karzai's older brother, Mahmoud, the sources said.
In a telephone interview from Kabul, Mahmoud Karzai - a U.S. citizen who used to live in Maryland - said he had not been contacted by U.S. authorities and added: "I know myself. I'm very clean."
A source familiar with the investigation said Mahmoud Karzai is expected to be indicted by a federal grand jury in U.S. District Court in Manhattan "The $64,000 question is when," said the source, who spoke on the condition of anonymity because no indictment has been made public.
Justice Department officials and federal prosecutors in Manhattan declined to comment. Given the diplomatic sensitivities, high-level officials at the Justice Department and possibly elsewhere in the government are likely to be involved in the final decision about whether to bring charges.
Hamid Karzai has in the past reacted angrily to what he regards as heavy-handed anti-corruption efforts by the United States and has even threatened to join the Taliban if foreigners do not stop meddling. The Obama administration, worried that such public spats undermine the war effort, has stepped back from outspoken criticism of alleged wrongdoing by members of Karzai's government and family.
U.S. officials in Kabul said they were planning for a potential backlash from the Afghan president if his brother is indicted.
Mahmoud Karzai, a former Baltimore restaurant owner, has come under intense scrutiny in recent weeks because of his role as the third biggest shareholder in Kabul Bank, which nearly collapsed in September after a run by depositors. The bank gave large off-the-book loans to well-connected insiders and gambled heavily on the Dubai property market.
Sources said the possible tax charges against Karzai relate to his sale of a luxury villa in the Gulf emirate in 2008.
Karzai purchased the property, on Palm Jumeirah, a man-made island in the Persian Gulf, in 2007 with a loan from Kabul Bank's founder and then chairman, Sherkhan Farnood, and made a profit of more than $900,000 when he sold it, according to property records. He paid back the loan.
Karzai said that he recently paid the U.S. government $301,000 to cover capital-gains tax generated by the 2008 Dubai transaction. "Whatever was due, I paid it," said Karzai, who lived for years in the United States but now spends most of his time in Afghanistan and Dubai. As a U.S. citizen, he is still subject to U.S. tax laws.
Karzai added that his family recently moved into rented accommodations after moving out of a seafront property in Dubai paid for by Kabul Bank. It is unclear whether U.S. investigators are looking into other matters beyond possible financial improprieties.