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Originally published Thursday, March 5, 2009 at 12:00 AM

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Karzai's brother finds way to top

Eight years ago, Mahmoud Karzai was running a few modest restaurants in San Francisco, Boston and Baltimore. Today, Karzai, an immigrant...

The New York Times

KABUL, Afghanistan — Eight years ago, Mahmoud Karzai was running a few modest restaurants in San Francisco, Boston and Baltimore. Today, Karzai, an immigrant waiter-turned-restaurant owner, is one of Afghanistan's most prosperous businessmen.

The older brother of Hamid Karzai, the Afghan president, Mahmoud Karzai has major interests in the country's only cement factory, its dominant bank, its most ambitious real-estate development, its only Toyota distributorship and four coal mines.

He and a business partner run the national chamber of commerce — which has far more clout than its American counterpart — allowing him to broker deals and lure foreign investors. For executives with problems with the Afghan government, he is the man to see. One prominent Afghan critic describes him as a "minister maker" with sway in hiring and firing top officials.

Karzai attributes his success to having big ambitions and taking on ventures others saw as too risky. "I'm investing in projects that require real work," he said. "I'm in love with the idea that Afghanistan can become a Singapore, a Hong Kong."

Karzai, though, clearly has exploited his connections, both in Washington and Kabul, to build his empire. He has collected millions in American government loans for real-estate developments in Kandahar and Kabul, capitalized on a friendship with former U.S. Rep. Jack Kemp, R-N.Y., for introductions to U.S. officials and international business executives, and benefited from what his rivals charge were sweetheart deals with the Afghan government.

Karzai's rise has stirred resentment and suspicion among many Afghans, who have grown disaffected with the Karzai government and its seeming tolerance for insider dealing, favor trading, bribe taking and other unsavory activities. Rampant corruption fuels the Taliban insurgency, experts warn, and threatens U.S. support for President Karzai, who is seeking re-election this year.

Political liability

While Mahmoud Karzai has not been accused of criminal wrongdoing, he has become a political liability, with critics saying his ascent was unfairly eased.

"If his brother wasn't the president, would he have generated this much wealth, and gotten into this many deals?" asked Daoud Sultanzoy, a member of parliament who has pushed for investigations into the Karzai family's business activities. "One of the reasons the people don't trust the government is because people in power have abused their power for personal gain."

Humayun Hamidzada, President Karzai's spokesman, denied that the president had shown favoritism.

Mahmoud Karzai similarly dismissed complaints that he had traded on his family ties. "There is a great amount of jealousy and misinformation about me," he said. "All the criticism that I'm getting insider deals because of my brother is flat-out wrong and lies."

President Karzai has privately complained that Mahmoud Karzai's dealings are politically embarrassing, people who know him say, but he has not tried to rein in Mahmoud or his other siblings.

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One brother, Qayum Karzai, who owns an Afghan restaurant in Baltimore, served until recently in parliament, though other members groused that he seldom showed up. He said that he is now an informal intermediary among President Karzai, Saudi Arabia and the Taliban.

Another brother, Ahmed Wali Karzai, the head of the Kandahar provincial council, has been accused of narcotics trafficking by Afghan and U.S. officials, who are frustrated that the president has not taken action.

Criticism for show?

Mahmoud Karzai, a U.S. citizen, kept his Maryland home, but travels back and forth to Kabul from a multimillion-dollar retreat in Dubai owned by his business partner. Back in his homeland, Karzai, 54, talks easily in Pashto to Kandahari businessmen and in fluent English to Westerners.

Karzai said he had chosen business projects that he believed would benefit Afghanistan. He insists that he has not gotten rich here because he has taken on so many liabilities.

Meanwhile, Karzai railed against government corruption and complained that his brother's mismanagement of the economy made it difficult to make money.

Other business and political leaders scoff at his criticisms of the president, saying they are intended to disguise the tight ties between the brothers.

It is "100 percent an act," said Gen. Hadi Khalid, who said he was fired from a top Interior Ministry post last year for opposing a deal involving Mahmoud Karzai's business partner, Sher Khan Farnood.

Karzai moved quickly after the 2001 U.S.-led invasion of Afghanistan to stake his claim in the postwar economy. As the Bush administration was beginning to provide aid, he soon led a small group that set up a new Afghan Chamber of Commerce, winning $6 million from the U.S. Agency for International Development.

Kemp connection

He made a point after the Sept. 11 attacks of getting to know conservative Republicans, including Kemp, who said he introduced Karzai to officials at the Overseas Private Investment Corp. (OPIC), a federal agency that provides financing to American businesses abroad.

Kemp said he wanted to encourage investment in Afghanistan, adding that he had not benefited from Karzai's deals. "I imagine he has dropped my name around Kabul and Kandahar, but I can assure you I have no equity or interest in his businesses," he said.

According to OPIC officials, two companies tied to Karzai got loans of more than $5 million to finance his Kandahar real-estate development and a large apartment complex in Kabul.

The Kandahar venture, a plan to build a residential community named Aynomina ("a place to live") — quickly stirred an outcry. The 10,000-acre property in Kandahar was owned by the army, but Kandahar officials turned it over to Karzai virtually free.

Karzai has had access to the financing required for his projects through the Kabul Bank, the largest commercial bank in Afghanistan, where he sits on the board. Farnood, the bank's founder, helped Karzai become an investor by issuing him a loan to buy shares, Karzai said.

He is also the majority owner of the only Toyota distributorship for Afghanistan, thanks in part to Kemp, who has served on Toyota's U.S. diversity advisory board and introduced Karzai to the automaker's executives.

Copyright © 2009 The Seattle Times Company

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