A major shareholder of Kabul Bank made Dh3 million (US$816,749) profit after using a loan from the institution to buy a Palm Jumeirah villa from the bank's chairman, The National can reveal.
Mahmoud Karzai, a brother of the Afghan president, Hamid Karzai, bought the villa on July 2 2007 and resold it in early 2008, according to records.
Mr Karzai, who owns 7 per cent of the ailing Kabul Bank, said in an interview yesterday there was "nothing wrong" with the transaction.
"I did it to get my residency visa," he said. "My children were going to school here. I was not a big property investor in Dubai."
Mr Karzai confirmed the selling price was about Dh10m, compared with the purchase price of Dh7m.
Details of his profitable Dubai property transaction came to light just a day after customers of Kabul Bank waited anxiously to learn of the lender's future and armed guards watched over crowds of angry depositors outside its main branch in the Afghan capital.
Mr Karzai said he could not recall the details of the final transaction, including how much he made or whether he kept the profit of more than Dh3m.
But he confirmed he received a loan from Kabul Bank to make the purchase, which he repaid after the sale.
Mr Karzai said he bought the villa, number 35 on Frond D of the palm-shaped island, from Sherkhan Farnood, the former chairman of Kabul Bank who was forced to step down last week.
Mr Farnood is at the centre of a major banking shake-up in Afghanistan after he and another executive were forced to resign from the bank because of a new rule that prevented shareholders from holding executive positions.
The pair are also under scrutiny over $150m worth of investments in Dubai property, including 16 properties on the Palm Jumeirah and two plots of land in Business Bay.
Mr Farnood did not return calls yesterday.
The banking scandal has rocked the Afghan financial system. Account holders at Kabul Bank, the largest commercial bank in the country, flocked to branches over the past week to withdraw their savings as they feared for its stability.
Officials from the central bank of Afghanistan played down the incidents at the bank and said the situation was "normalising".
The government has frozen the assets of Mr Farnood and several other shareholders of Kabul Bank. Mr Karzai's assets have not been frozen and there is no indication he has committed any wrongdoing.
The 16 Palm Jumeirah properties were signed back to the ownership of the bank by Mr Farnood and his wife, Farida, as a condition of Mr Farnood's resignation.
The properties included 15 villas and one apartment located on seven different fronds and the trunk of the island. They were all bought between December 19 2006 and October 21 2007.
The Business Bay plots were also signed back to the ownership of the bank.
Property prices were steadily rising when Mr Karzai bought his villa in 2007. Brokers said yesterday the market hit its peak at the end of 2008, before falling back to 2007 levels in today's market.
"Prices increased drastically from 2007 to 2008," said Elen Manukyan, the senior sales and leasing consultant at the brokerage Better Homes. "It was an ideal time to get into the market."
Ms Manukyan said Mr Farnood had been trying to sell some of his villas for more than six months but was asking for prices "higher than the market rate".
Most of the villas bought with Kabul Bank funds were registered under the name of Mr Farnood, who owns 28.16 per cent of Kabul Bank, while at least five of the properties were registered to his wife's name. Mrs Farnood owns 6.68 per cent of the bank's shares.
Two of the villa purchases were brokered by Masood Naseeb, the chief executive of Elysian Properties in Dubai. Mr Naseeb's uncle is Ghulam Farooq Naseeb, who owns 2.96 per cent of Kabul Bank.
Masood Naseeb, who is travelling in Brazil where his company has expanded, declined to comment yesterday.
His father, Ghulam Dawood Naseeb, owned a villa just down the road from four of the Kabul Bank villas on Frond O of the Palm, records show.