This is the 8th Kabul Press article by the author regarding waste and mismanagement by the U.S. government in its civilian aid program for Afghanistan. The issue that President Obama should focus on is not whether to surge more troops, but whether the current military and civilian effort is being competently managed. Until U.S. Embassy officials are held accountable for their mismanagement of Afghan aid funds, the civilian “surge” in Afghanistan will continue to falter. The U.S. Congress should delay a final vote on the State Department’s 2010 budget until fundamental reforms are implemented to better award, track and manage all aid to Afghanistan. Additional articles in this series will be forthcoming in December.
Matthew J. Nasuti, former U.S. Military Prosecutor, City Prosecutor for Los Angeles, and Senior City Management Advisor to the U.S. State Department (2008)
The U.S. Embassy in Kabul usually wastes Afghan aid funds on a grand scale, but Kabul Press has discovered that it is just as willing to waste American taxpayer funds on a small scale, if $3.8 million can be called small. This report looks into the apparent loss of $3.8 million in a speculative business venture.
The story begins in 2004, when a sharply dressed 34 year old German national named Pierre Van Hoeylandt arrives in Kabul, reportedly accompanied by a young, shapely blond. He forms a company called Afghanistan Capital Partners, Ltd. or “ACAP.” ACAP’s goal is to attract venture capital for its ARF (Afghanistan Renewal Fund). ACAP, in 2004 and 2005, had no office in Afghanistan and apparently no employees. Despite that, ACAP was awarded $3.8 million in Afghanistan aid funds. On January 27, 2006, the U.S. Department of State published a “fact sheet” on Afghanistan in which it touted the Department’s support for ARF. However, by the end of 2006, the State Department had ceased all mention of ARF and ACAP.
The U.S. Embassy manages most of its aid through the U.S. Agency for International Development (USAID). USAID - Kabul, in 2005, consisted of only a handful of employees. USAID hired a group of foreign contractors and tasked them with representing the American government. It placed these contractors in charge of some of Afghanistan’s aid funds. One such company was Chemonics, Inc. Kabul Press profiled Chemonics in a September 11, 2009, investigative report. It detailed how 240 million USD was paid to Chemonics in 2007, for agricultural work in northern and southern Afghanistan, work which U.S. government auditors could not verify was ever accomplished.
In 2005, Chemonics was managing a U.S. Embassy - Kabul program called RAMP (Rebuilding Agricultural Markets Program - Afghanistan). The U.S. Embassy permitted Chemonics to make an award in February, 2005, of $3.8 million to Pierre Van Hoeylandt and ACAP. This is detailed in Chemonics’ Quarterly Reports for RAMP. Chemonics’ reports are vague as to how ACAP was to spend the funds. The funds appear to have been designated for micro finance (i.e., micro-loans).
By 2006, Chemonics’ quarterly reports say less and less about ACAP. There is no mention of any progress by ACAP in lending any of the $3.8 million to any Afghans. The circumstances of the award to ACAP are irregular at best:
First: There is no evidence that this project was ever publicly advertised. It appears that the $3.8 million was a sole-source award, which circumvented the normal bidding rules of the U.S. government.
Second: ACAP had no apparent history or experience working in a developing country or in making micro-loans. In 2005, it seems to have only existed on paper. ACAP did not even have an office in Afghanistan when it was awarded the $3.8 million. It was a full year before ACAP would rent office space in the Kabul Business Center in the Shahr-e Naw section of the city. Only then did it apparently register itself as a local business with the Afghanistan Investment Support Agency. This award violates USAID’s own rules for capitalizing intermediate credit institutions.
Third: Why was ACAP given $3.8 million in one lump sum? Why not fund the company incrementally? Why not provide it with $500,000 and have it make 1,000 micro-loans, then assess its progress before providing it with more funds?
The answers to these questions should be known by the USAID officials who were responsible for the Chemonics contract and for the February 15, 2005, award to ACAP (JO#39-0003-Acap). That would have been USAID Project Manager - Frances Tooney; USAID supervisor - Daniel Miller and USAID Contracting Officer - Margaret S. Kline.
In 2006, USAID continued to boast about its financing of ACAP and of its Afghanistan Renewal Fund (ARF). USAID Mission Director Robin Philips and Afghanistan Desk Officer Caroline Brearley issued a press release touting USAID’s economic growth program in Afghanistan. They specifically cited to the agency’s support for ACAP. Despite that press release, this author has found no evidence that any of the $3.8 million was ever loaned to any Afghan. By the end of 2006, all mention of ACAP ceased in USAID’s records and press releases.
At this point, a blog called “Kavkazcenter.com” picked up the story. It reported that in 2006, low-level USAID managers ordered Pierre Van Hoeylandt to provide guarantees for the $3.8 million. Instead of doing so, Van Hoeylandt met with the U.S. Ambassador in Kabul and the USAID Country Director and they reportedly countermanded that order. The blog reported that after that, the U.S. government lost all control over the $3.8 million and apparently none of it was ever repaid.
If these funds are truly lost, then the American taxpayer has once again been defrauded and the people of Afghanistan deprived of critically needed financial resources. In contrast to the failures of the U.S. Embassy, CBC News published a report on February 10, 2009, detailing how the Canadian government had successfully provided 140,000 micro-loans in Afghanistan, 89% to women seeking to start businesses.
One dark note to this story is the reporting of Gayle Tzemach Lemmon, whose article: “Thugs Plague Women Entrepreneurs,” was published December 1, 2009, in The Daily Beast. She reports that when donors in Afghanistan publicize their micro-loans, some recipients are then visited by local criminals demanding the funds. International agencies, including the U.S. Embassy and its associated sub-agencies, such as USAID, need to limit or preferably eliminate their self-promotion efforts, especially regarding any in-country loans.
This author contacted Dianne Ray, who is the current USAID Country Officer for the Afghanistan Desk and inquired about the status of the $3.8 million. This began a series of e-mails with Stephen Susens, USAID’s Senior Communications Officer in Kabul, with Jim Carey, USAID’s Public Information Officer for the Afghanistan/Pakistan Task Force, and with Harry Edwards, USAID’s Acting Press Director. None would admit to knowing anything about ACAP or the $3.8 million.
ACAP was also directly contacted. It no longer has an active Internet website, but it does maintain an e-mail address of “London acap.com.” This author e-mailed the company and summarized this article to it. ACAP was asked to correct any misstatements or errors, but it declined to contact the Kabul Press.
This report details two disturbing issues. The narrow issue concerns the apparent disappearance of $3.8 million, while the broader issue is the lack of transparency by the U.S. Embassy - Kabul, USAID and the U.S. Department of State. The data for most of this report was obtained over the Internet from non-government sources. It proved impossible to locate any details of the $3.8 million from any of the U.S. government’s files. Even USAID officials claimed to be unable to easily track the agency’s expenditures. American and Afghan citizens should be able to track every dollar that the U.S. Congress appropriated in aid for Afghanistan from 2001 to the present and they should be able to then track how those aid dollars were spent, but they cannot.
This author, while working for Bechtel, was overseeing $1/4 billion in construction projects. For those projects, virtually every dollar was accounted for. Keeping track of $3.8 million within a budget of $1 billion should not be a difficult task for any competent manager. The USAID officials who were contacted by Kabul Press should have been able to locate (almost immediately) at least some information regarding the $3.8 million. Yet, after several days of apparent research, these officials were unable to answer simple questions about the $3.8 million. They would not even confirm that ACAP was a USAID subcontractor! It is a fact that mismanagement flourishes in the darkness.
The President of the United States issued an Executive Order, which is numbered: 12674. Section 101(k) requires that all U.S. government officials report any corruption or waste of public funds. This is also required by Title 18, Section 4 of the U.S. Code. Despite these provisions, a loss of $3.8 million can apparently go unnoticed and unreported.
If the facts of this article are correct, this matter should be referred to the Federal Bureau of Investigation (FBI) and may merit criminal charges for the loss of public funds, the failure to properly account for the funds, the failure to properly report the loss to the Justice Department’s National Procurement Fraud Taskforce and/or any cover up of that loss.