The Wall Street Journal, November 5, 2012

U.S. Finds Graft by Favored Afghan Leader

Now, under Gov. Shirzai, U.S. officials say, Nangarhar has turned into a center of corruption, allowing the Taliban and criminal groups to stage a comeback

By Nathan Hodge

One of Afghanistan's top power brokers has been freeing suspected insurgents, running an open extortion scheme and traveling with suitcases of undeclared cash earned from criminal activity, according to internal U.S. documents.

A few years ago, the U.S. military described Gov. Gul Agha Shirzai as the best hope for securing Nangarhar province, a critical gateway to Pakistan. Now, under Gov. Shirzai, U.S. officials say, Nangarhar has turned into a center of corruption, allowing the Taliban and criminal groups to stage a comeback.

An assessment of Gov. Shirzai prepared by a top U.S. civilian official in eastern Afghanistan—marked "secret" and viewed by The Wall Street Journal—details "systemic corruption" by the governor and members of his administration, including extortion, illegal "land grabbing" and narcotics trafficking.

The assessment is a draft diplomatic cable that is awaiting final review. A second document, a shorter U.S. diplomatic cable marked "sensitive" and prepared by civilian U.S. customs experts, sounds a similar theme. U.S. officials said the documents were authentic and didn't dispute their contents.

Gov. Shirzai, contacted through his spokesman and intermediaries with details on the allegations, didn't respond to repeated requests for comment.

U.S. officials acknowledge that corruption is a problem in Nangarhar province. They have long described Gov. Shirzai as someone who could deliver on security and reconstruction, even while acknowledging he was an autocrat with a fortune from insider dealings. Now, U.S. officials working in Afghanistan openly question whether that bargain was a miscalculation.

Cmdr. William Speaks, a Defense Department spokesman, said the Pentagon takes corruption allegations "very seriously," but added: "It's also important to remember that we are not in a position to select the country's leaders—that is a matter for the Afghan people."

The deterioration in Nangarhar—home to around 1.4 million people and eastern Afghanistan's biggest city, Jalalabad—underscores the pitfalls of America's long-standing strategy of relying on Afghan warlords to bring security. After a decade of nation-building attempts, U.S. and Afghan officials worry that, as the U.S.-led coalition withdraws, the country will be dominated once again by what they describe as "criminal patronage networks," fueling the insurgency.

The Taliban began their march to power in the 1990s in the southern city of Kandahar because of popular outrage with local warlords' abuses. Gov. Shirzai was one of these warlords, serving as Kandahar governor at the time, and once again following the 2001 U.S. invasion.

Afghan President Hamid Karzai, a fellow Kandahari, appointed Gov. Shirzai to oversee Nangarhar in 2005. Mr. Karzai's term expires in 2014. Gov. Shirzai has publicly indicated his interest in running for the presidency.

The draft U.S. assessment of Gov. Shirzai, which is based on intelligence reports and other sources, alleges that he has amassed a vast personal fortune from the so-called Shirzai Fund, an unauthorized tax collected at the Torkham Gate border crossing with neighboring Pakistan. The operation nets the governor $1.5 million to $4 million per month, according to the report.

During a trip to Germany in early July, Gov. Shirzai was detained for two hours by the German Customs Police as he tried to enter carrying three briefcases full of undeclared cash, the report says. "Because of his diplomatic passport, he was released and allowed to enter the country with his ill-gotten gains," it says.

In this Sept. 18, 2010 photo, Nangarhar Gov. Gul Agha Sherzai speaks in his office in Jalalabad in Afghanistan's Nangarhar province. He has been accused of land-grabbing. (Photo: Rahmat Gul/AP)

The German Foreign Ministry wasn't informed about the governor's visit to the country, said a person familiar with the matter. German tax law prohibits customs officials from revealing details of individual cases or incidents, said a spokeswoman for the Frankfurt Airport customs office.

The U.S. document also says officials in Gov. Shirzai's administration "have recently been involved in facilitating the insurgency by refusing to detain and prosecute insurgents caught preparing attacks" on U.S. and Afghan troops.

In one case, the document says, Gov. Shirzai lobbied to obtain the release of six Afghans who had been arrested in Nangarhar's Goshta district for driving trucks carrying about a half-ton of ammonium nitrate—a chemical precursor for homemade explosives widely used by insurgents—hidden in bags of sugar. In another case, it says, Gov. Shirzai applied pressure to local officials to release a dozen men who had been detained by Afghan forces for allegedly manufacturing and placing roadside bombs in the province's restless Khogyani district. They were released before they could be tried.

A senior coalition official, queried about the allegations, said he believed Gov. Shirzai was intervening in these cases for monetary gain, not out of any sympathy for the Taliban.

The U.S. document also details Mr. Shirzai's association with alleged local criminals. One passage describes the governor attending wedding parties in the company of an alleged crime boss who had been recently been released on bail. According to the document, Mr. Shirzai helped broker the man's release. Footage of the events was carried on local television, the report said.

Gov. Shirzai was once a U.S. favorite. In interviews with the Journal in 2009, senior U.S. officials said he was able to get things done through "force of personality"—including cutting opium production, boosting security and pushing through reconstruction projects. It was the U.S. that installed the former warlord as governor of Kandahar after ousting the Taliban in 2001, and he amassed a considerable fortune providing contracting services to the giant U.S. military base there.

U.S. civilian and military officials working in the region these days openly describe Gov. Shirzai as emblematic of the dysfunctional government that Afghanistan will inherit after most U.S. and international troops withdraw in 2014. "He is the biggest detriment to good governance in Nangarhar," said Lt. Col. Martin Willmarth, an Army civil affairs officer in the province. "I wish we could get rid of him."

While Gov. Shirzai isn't a Nangarhar native, his revenue-collection scheme gives him a powerful tool for winning local loyalties. At a provincial development committee meeting at the governor's palace in September—chaired by Gov. Shirzai and observed by a Wall Street Journal reporter—local officials hashed out the details of local development projects: school textbooks to be ordered, bridges and canals to be repaired, power outages to be discussed.

The meeting stalled because U.S. advisers working with Gov. Shirzai had put an uncomfortable topic at the top of the agenda: The province's massive budget shortfall. The local directors, who report to ministries in Kabul, struggled to understand the detailed budget numbers that had been prepared for them by U.S. advisers. With just a few months left in Afghanistan's current fiscal year, the central government in Kabul had transferred less than 5% of the $48 million earmarked for development projects in Nangarhar to the provincial level.

That left a gaping shortfall in funding for social programs. The directors were reluctant to admit that to the governor.

Gov. Shirzai intervened by spreading around the cash.

"I'll give you $50,000 from the Shirzai Fund to solve your problem," he told the man representing the Ministry of Labor, Social Affairs, Martyrs and Disabled. The governor then doubled his offer to $100,000, to applause. His fund would also foot the $30,000 bill for an X-ray machine at a local hospital, he added.

"He's making it rain again," an astonished U.S. official said after the meeting.

"This is how the sausage gets made," said Air Force Lt. Col. Grant Hargrove, the commander of the U.S.-led Nangarhar Provincial Reconstruction Team, a military unit focusing on development issues in the province, after observing the meeting.

Gov. Shirzai's quick-fix largess presents a big dilemma for Nangarhar. According to the previously undisclosed report by U.S. government customs experts, the Shirzai Fund collects tolls at an unmarked customs building across from the main complex at the Torkham Gate crossing.

At the crossing, Afghan customs officials levy a lawful fee for vehicles entering the country. But provincial officials reporting to Gov. Shirzai collect separate fees—from 200 to 2,500 Afghanis ($4 to $50) per vehicle, with the tariffs set on a sliding scale, depending on the size of the vehicle and the type of cargo. The secret report describes the tax as an "ongoing illegal extortion scheme" at the border.

"The collection operation is well organized and run in an efficient, businesslike manner," the customs report states. The illegal tax represents a fraction of what Gov. Shirzai is believed to earn from other alleged criminal activity, the U.S. reports and officials say.

Afghan officials acknowledge the fund's existence. Ihsanullah Kamawal, Afghan Customs director for Nangarhar, said the Shirzai Fund—formally known as the "Provincial Reconstruction Fund"—was voluntarily supported by local traders, who in the past had to pay fees extorted by the Taliban and local warlords. Collection of the fund "does not affect our revenues," Mr. Kamawal said.

Truck drivers who travel through the Torkham Gate say they have been forced to pay the fee as they move cargo to the provincial capital of Jalalabad from Peshawar, Pakistan.

Trucker Jafar Utmanzai said his contribution to the Shirzai Fund was usually around 500 Afghanis, or about $10. "They say it's a reconstruction fund, but God knows where this money goes," Mr. Utmanzai said.

Mirwais Yasini, an influential Afghan parliamentarian from Nangarhar, said Gov. Shirzai's provincial reconstruction scheme was akin to someone stealing $500 from your pocket and then saying: "Don't worry, I'll buy you lunch today."

Meanwhile, lawlessness and violence has risen in Nangarhar, once considered relatively peaceful. In recent months, several judges have been assassinated, including Behsud District Judge Sharifullah, whose nearly decapitated body was discovered after he was abducted from a downtown vegetable market in Jalalabad in March.

An atmosphere of intimidation has made it all the more difficult to oust corrupt officials. Mr. Karzai recently sacked several provincial governors for poor performance and lack of progress in combating corruption. Gov. Shirzai survived the purge. So did a northern power broker, Tajik former warlord Gen. Mohammed Atta Noor, the governor of Balkh province—home to the main border crossing with Uzbekistan.

A senior Afghan official in Kabul said the two governors have been spared because firing them would have destabilized the region.

U.S. officials openly acknowledge corruption by Mr. Shirzai. But the consensus at the coalition's headquarters in Kabul hasn't tipped in favor of calling for his ouster—especially considering how important the Torkham Gate crossing will be for removing U.S. equipment as military forces go home.

"He's been on our side," a senior coalition official said. "We know he's corrupt. But we have to ask ourselves: Has he crossed a sufficient number of red lines that we've got to deal with? So far, it doesn't appear to be."

Habib Khan Totakhil and David Crawford contributed to this article.

Originally published on Nov. 2, 2012

Characters Count: 13174