Kabul – Afghan President Ashraf Ghani has halted a controversial real estate deal worth hundreds of millions of dollars with a banker currently in jail for his role in the country’s biggest ever corruption scandal, officials said Sunday.

Former Kabul Bank CEO Khalilullah Ferozi speaks at a court in Kabul on March 5, 2013 © AFP/File Shah Marai
Former Kabul Bank CEO Khalilullah Ferozi speaks at a court in Kabul on March 5, 2013 © AFP/File Shah Marai

Khalilullah Ferozi last week signed an agreement with the government for the development of a mega housing project in the Afghan capital, despite being sentenced last year to 10 years in prison for embezzling from Kabul Bank.

The disgraced banker’s involvement in the $900 million ‘Smart City Township’ project drew stern criticism from Afghan lawmakers and the public when it was revealed on Wednesday, forcing the government to back down.

“The legal basis of this MOU (Memorandum of Understanding) was weak, it has been cancelled,” presidential spokesman Sayed Zafar Hashemi told AFP on Sunday, adding: “Public opinion is important for us.”

In a statement, Ghani said that the agreement with Ferozi had been cancelled, while his prison sentence in the Kabul Bank case would be enforced in full.

The status of some 33 acres of land in Kabul which Ferozi had designated for the reportedly 8,800-home project would also be reviewed, Ghani said.

Ferozi’s involvement in the deal with the government was strongly protested against by Afghanistan’s parliament, while Integrity Watch Afghanistan, a non-profit anti-corruption organisation called it “outrageous.”

“Allowing a convicted criminal to take part in a huge investment project brings Afghan government’s commitment to fight corruption under serious question,” the group’s executive director Sayed Ikram Afzali said in a statement.

“The government would seriously undermine its credibility at home and abroad if it does not take corrective action,” he added.

The collapse of Kabul Bank in 2010 triggered a financial crisis and a run on deposits, worrying foreign donors who demanded action to cut down on corruption.

The two former heads of the bank, Sher Khan Fernod and former chief executive Khalilullah Ferozi, were sentenced to jail last year for their roles in the $900 million fraud, that caused the country’s largest private bank to collapse.

The scandal highlighted the corruption that had become rampant in Afghanistan following a flow of foreign aid worth billions of dollars in the wake of the 2001 US-led invasion to oust the Taliban

The bank was then seized by the government in 2010 after exposure of the fraud, which had led the International Monetary Fund to temporarily halt its loans to Afghanistan as donor nations demanded action to cut down on corruption.