KABUL, Afghanistan - When a brother and a nephew of an Afghan vice president wanted to build up their fuel transport business, they took out a $19 million loan from Kabul Bank. When a brother of the president wanted to invest in a cement factory, he took out a $2.9 million loan; he also took out $6 million for a town house in Dubai. When the bank’s chief executive wanted to invest in newly built apartments in Kabul, he took almost $18 million.

The terms were hard to beat: no collateral, little or no interest. And no repayment due date.

Those are just a few of the loans detailed in a damning internal report by Afghanistan’s own Central Bank, which depicts the Afghan political elite as using Kabul Bank, the country’s biggest financial institution, as its private source of ready cash.

The report both raises questions about why the authorities did not act sooner and suggests that the answers lay in the political connections of the bank’s officers and shareholders ? the recipients of most of the more than $900 million in loans.

“Transparency and accountability were sacrificed to widespread falsifications in order to cover up the use of influence,” the Central Bank’s officials wrote in the October 20 report, a copy of which was obtained by The New York Times.

“It was like a Ponzi scheme,” said a Western diplomat familiar with the bank’s dealings, who spoke on the condition of anonymity because he was not authorized to speak to reporters on the highly delicate matter. “The bank had to keep marketing and getting more deposits to fund the loans that they weren’t getting interest on.”

The report also suggests that Kabul Bank’s long-term finances are in much more dire shape than previously understood, a condition that explains why the Central Bank has been discussing putting the bank into receivership. The International Monetary Fund is pressing for receivership as a condition of renewing its program with Afghanistan.

Whether the Afghan government will approve the dissolution of the bank is not yet clear, but whatever its future, as the Central Bank outlines in its report, there will be high costs for the Afghan government, which will have to make good on the loans that will not be paid back in order to keep depositors whole.

The sheer scale of the fraud and the lack of documentation about exactly where the money went appear to have initially stunned Central Bank officials. “All administrative bodies, supervisory bodies and decision-making bodies” in Kabul Bank played a role in the fraud, wrote the Central Bank’s internal auditors.

So did the shareholders, who knew one another personally and were involved in joint bank-financed ventures. They “engineered extensive violations and used influence” with the bank’s executives so that they would have a ready source of money, the report said.

The Central Bank has belatedly tried to stem the losses. Its officials have worked hard to secure loan repayment agreements from the major borrowers and shareholders, but it has not been easy.

In some cases the loans were for businesses from which little money could be recouped even if the assets were sold off. For instance, the $98 million that poured into Pamir Airways could not be repaid by selling its small fleet of aging airplanes, which are now grounded.

While some loans are being repaid with interest, a vast majority are not, according to the Central Bank report, which lists the bank’s total outstanding loans as $986 million.

Bank officers handed money out to political campaigns, artists, a sports team and influential figures, and used bank revenues to pay for their own lifestyles, the report said.

Among the 18 breaches of Afghan banking regulations detailed in the Central Bank’s report, Kabul Bank invested directly in businesses other than banking, including an airline, a television station, numerous real estate construction ventures and gas transport.

Some of those businesses then tried to drive out rivals by slashing prices below cost, losing millions of dollars. For instance Pamir Airlines cut its ticket prices to Dubai so far below its costs (at one time to $50 a ticket) that no other airline could match its prices. But it failed to drive out competitors. After a plane crash that killed 44 people, Pamir was unable to compensate the victims. The airline was recently shut down by the country’s Ministry of Transport and Civil Aviation for its poor safety record.

The largest number of loans, other than those taken by the bank’s chairman, Sherkhan Farnood, went to companies in which the brother of General Muhammad Qasim Fahim, the Afghan first vice president, had an interest. The brother, Abdul Haseen Fahim, had a share in at least three companies that took loans totaling $182 million. While Abdul Haseen Fahim had only a share in each of these companies, his presence, like that of Mahmoud Karzai, a brother of President Hamid Karzai, helped to curtail scrutiny of the loan’s validity, according to diplomats.

Abdul Haseen Fahim played down the significance of his loans, said he had paid back “10 percent to 20 percent” of the money and suggested that the bank and its chairman, Mr. Farnood, bore the main responsibility.

Among the outstanding loans is one for $21 million to the Kabul Oil Company, in which Abdul Haseen Fahim had part ownership along with Mohammed Ismail Ghazanfar, the owner of Ghazanfar Bank; Atta Muhammad Noor, a former Northern Alliance commander and now the governor of Balkh Province; and Kamal Nabizada, a business magnate in northern Afghanistan. Mr. Ghazanfar subsequently sold his share to the Kabul Bank chairman, As for Mahmoud Karzai, the president’s brother, he has agreed to pay back only a sliver of some $18 million he borrowed without interest, according to the Central Bank’s report.

Still, the government’s official line is that those who committed the fraud will be prosecuted. “Kabul Bank is a criminal case,” Rangin Dadfar Spanta, the Afghan national security adviser, said . “We have to protect the money and property of our people . In the coming days, we will have more investigations.”


By ALISSA J. RUBIN and ROD NORDLAND