Judge toughens jail terms in Kabul Bank scandal, freezes Karzai brother's assets

(Reuters) - An Afghan judge tripled the jail sentences of two former heads of Kabul Bank to 15 years on Tuesday at the end of a re-opened court case into the bank's collapse in 2010, which followed allegations of fraud and triggered a financial crisis.

Afghanistan's new President Ashraf Ghani announced on Oct. 1 that he would re-open the inquiry into the theft of almost $1 billion from the bank, fulfilling a campaign promise to make fighting corruption a priority.

The case also involved Mahmoud Karzai, the brother of Ghani's predecessor president Hamid Karzai. Mahmoud Karzai, a shareholder in the bank, has so far been spared jail but the judge on Tuesday ordered that his assets be frozen, along with those of others, until all the funds stolen from the bank have been returned. They face prosecution if the funds are not repaid.

The Afghan government was forced to bail out the country's then biggest bank after a run on deposits in 2010. It was later re-launched as the state-run New Kabul Bank, but confidence in the banking sector has yet to fully recover.

Only about a third of the $935 million stolen has been recovered, according to the receivers.

The two former heads of the bank, founder Sher Khan Fernod and former Chief Executive Haji Khalil Ferozi, had been convicted in the initial inquiry of taking $810 million of the stolen money and were both sentenced to jail for five years. Their jail terms were tripled on Tuesday.  More