Sunday, May 15, 2011

USAID Corruption in Afghanistan

USAID Corruption in Afghanistan, and it continues!!!

The ARF is a venture capital fund set up at the beginning of early 2004 to make    investments in Afghanistan, in such sectors as agriculture, stone
  mining, and  other key sectors of the Afghan economy. The principal manager [WAS] a company called AfghanistanCapital Partners, headed by one PierreVan Hoeylandt.

 Van Hoeylandt claims to be a former Rhodes Scholar, a former manager at the ultra-exclusive consulting firm McKinsey & Co., and at one time, a journalist covering the Rwanda massacre (:it is likely that nobody has checked whether his CV claims are true or not:.).  He is known to have high-ranking friends, especially inside the USEmbassy (it is believed the USAmbassador is an admirer).  Van Hoeylandt always speaks in a low slow voice, to convey an  impression of calm and sophistication.  He also has gained attention by  squiring around Kabula blonde bombshell half his age.  He is always dressed to perfection.

ARF is a temporary fund, meaning that after a certain number of years it will be dissolved and the principal and earnings will be redistributed among the participating investors.  Source believes the term of the fund is eight years.

A number of sucker multinational donors have invested money in this fund, captivated by Van Hoeylandt's charm and impeccable "credentials."  Chief among these, of course, is USAID (in Afghanistanalways willing to throw money at anybody with a "bright idea"), which invested million in 2004 through a now terminated agriculture project.  Other investors are Asian Development Bank, the Canadian development organization, and others.  This despite the fact that venture capital funds in general have had an embarrassing record in these parts of the world. It is unclear total level of donor involvement versus that of private investors, but total capitalization of fund is million, so USAID alone contributed 25% of the total.

Van Hoeylandt has set up a very tricky scheme, whereby donors are in a more disadvantageous position compared to the private investors.  Payments to the private investors take precedence over any payment to donor investors.  The donor funds were there to "protect" the investments of the private investors.

The USAID "investment" was of an even more unusual nature.  It appears that there is no requirement that it will ever be repaid.  In other words, what may remain from that million will be divvied up among the private investors.  If they just don't lose the money, they stand to make a million dollar bonanza. It is unclear if other donor "investments" obey this same pattern.

Naturally, Mr. Van Hoeylandt is the leading private investor in the fund.  Others are reputedly "Afghan-Americans" with links to the warlords.  The cavalier generosity of the donors was not limited to investment.  They also provided quite a bit of money in operational grants.  It should be noted that managers of the fund have been assigned very high salaries, to "compensate them for the difficulty of prudently handling these investments in this inhospitable environment."  Van Hoeylandt, as General Manager of ARF, assigned himself a by no means meager income of 100,000 per year plus many other benefits, and several other key managers have salaries above 80,000.  The donor operational grants went to pay for this, the fund itself did not have to do anything on its own.

Number of investments made by the ARF to Afghan business as of late November 2006: 0

Amount invested in Afghan business as of late November 2006:   0.

It is quite unclear what is going on in the ARF.  Van Hoeylandt was running around at the beginning of 2004, claiming to be doing massive work to get the fund going.  At that time he claimed the fund would close in September 2004.  However, the fund did not close until early 2006.  Furthermore, reports are that ARF has still not hired any field Afghan staff. Van Hoeylandt goes around telling everybody that "we are on the verge of making our first deal."  He has been saying that for 2.5 years now, and still does this.  One possibility why nobody has run him out of Dodge is that everybody in USAID and other donor organizations keep rotating out of Kabul.  Therefore, very few people know his full track record.

KEY FACT: In early 2006, lower level managers of the USAID agriculture project that made the donation to ARF formally took a decision to obligate Van Hoeylandt to return the funds, based on complete non-performance by ARF of its contract with the USAID project. However, Van Hoeylandt then personally met the USAmbassador and USAID Director, who then issued an order countermanding the decision of the project managers.  The project managers then had to give up, and all control over ARF was lost.

There is complete dismay among many of the development professionals as to how Van Hoeylandt has been able to get away with this for so long, almost three years. Above all, they attribute it to his ability to have key friends in high places.  Whenever ARF is mentioned, people roll their eyes.  But among lower-level USAID officers, nobody dares raise a ruckus or even ask questions.

INTERPRETATION:  The sense is that Van Hoeylandt is not intending to make any real investments.  Probably he will make a couple of symbolic deals.  But obviously the idea is to hold on until a time when he can cancel the fund and divvie up the donor funds among himself and his partners.  In the meantime, keep enjoying the salary.  There is also the question of what he has done with the million in his possession.  Clearly, if he places the funds abroad, at a 5% interest rate, that is a cool million per year.  Not bad for doing nothing.

WHO IS SCREWED:  US taxpayers for one.   million gift to one slick operator.  USAID credibility, of course, with senior USAID managers overruling professional managers as if they were kings, rightful owners of the million.  Also, all the Afghan businesses that have approached ARF for funds and put on an "indefinite waiting list."

-- - The professional email service

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