By Jessica Donati and Mirwais Harooni
KABUL, Oct 22 (Reuters) - U.S. inspectors are on the trail of a successful Afghan businessman they believe has channelled millions of dollars in aid to the al Qaeda-linked Haqqani network, one of the deadliest insurgent groups in Afghanistan, but still has donor-funded reconstruction contracts around the country.
The investigation, detailed in a trove of documents obtained by Reuters, comes at a crucial time for Afghanistan and its foreign allies, who have poured billions of dollars into leaving behind a stable, viable state when most NATO-led combat troops pull out next year.
Development aid to Afghanistan - approaching $100 billion after 12 years of war - and the contractors who receive it are being scrutinised by the U.S. Special Inspector General for Afghan Reconstruction (SIGAR), with one case in particular involving businessman Haji Khalil Zadran linked to the Haqqanis.
"It makes absolutely no sense that individuals and entities designated as supporting the insurgency could receive U.S. contracts," John Sopko, the chief of the U.S. watchdog agency, told Reuters.
"If they get a contract not only do they get U.S. taxpayer money, but they could gain access to U.S. personnel and facilities, putting our troops at risk," he said.
Zadran rejects the allegations, saying it is simply a case of mistaken identity.
SIGAR believes Zadran's case is one of dozens that show a sinister side to the story of how endemic corruption, a charge often levelled at President Hamid Karzai's government, has undermined efforts to stabilise Afghanistan.
Zadran left school to drive trucks and went on to build an empire that has won more than $125 million in donor-funded construction projects.
His fortune should reflect the potential for success in post-war Afghanistan. Instead, the SIGAR investigation paints a picture of how aid has been siphoned off to maintain a web of corruption, violence and failure.
The inability over many years to stop firms believed to be supporting the insurgency from winning multi-million-dollar contracts exposes the lack of control that donors have over cash once it is handed over to the Afghan government.
Those transfers make up an increasing proportion of aid. U.S. federal agencies want more than $10.7 billion for reconstruction programmes in 2014, SIGAR says, and the government has promised at least half will be granted directly to Afghan institutions to spend as they see fit.
Much of the evidence against Zadran is classified, but the cache of documents given to Reuters by U.S. officials on condition of anonymity show that he has close business ties with the Haqqani network's leader, Sirajuddin Haqqani.
The Haqqanis, Islamist insurgents who operate on both sides of the Afghanistan-Pakistan border, are believed to have introduced suicide bombing into Afghanistan.
The links between Zadran and the insurgency include him teaming up with Saadullah Khan and Brothers Engineering and Construction Company (SKB), believed to be one of Sirajuddin Haqqani's companies.
Together they won a $15 million contract to help build a road between the towns of Gardez and Khost in Afghanistan's east for the U.S. Agency for International Development (USAID) in 2011.
"The owners of these companies are facilitators and commanders of the Haqqani Network," one U.S. government memorandum says.
Zadran says he approached SKB Chief Executive Kamal Naser Khan because they had already worked together on the construction of an airport in Faizabad in northeastern Afghanistan in 2009.
Zadran confirmed the contracts and partnerships, but said that alone did not constitute proof he financed the Haqqanis.
On the contrary, he said, it was fortunate the U.S. auditors had alerted him because it had saved him from becoming involved.
Zadran won the road contract in January 2011 but it was cancelled a month later when vetting uncovered "derogatory information" about sub-contractors, USAID says.
Zadran's accountant said they had shares in SKB at the time the contract was awarded but had since sold them.
Reuters approached SKB with a request to speak with the chief executive, but calls were not returned.
The Gardez-Khost road project began in 2007 with a price tag of $68.5 million. It remains unfinished, while completed sections are already beginning to crack, and in August, a USAID official put the latest estimate of the bill at $230 million.
U.S officials say some of the profits from such contracts - in Zadran's case, estimated by SIGAR to be worth $125 million - have been channelled to the Haqqanis. The documents provided to Reuters do not detail how much, but one memorandum puts the figure for SKB alone at $1-2 million a month.
TEA AND ROSE GARDENS
Zadran met Reuters at a prominent warlord's house in central Kabul and, surrounded by rose gardens, spoke openly over tea about the U.S. allegations. He said the United States has never given him concrete evidence of his support for the Haqqanis, who come from his tribe in eastern Afghanistan.
He said Sirajuddin has a brother whose name is also Haji Khalil Zadran - not uncommon given Afghanistan's deep tribal complexities - and that U.S. officials had simply confused them.
The Afghanistan Investment Support Agency, however, says Zadran is the only person by that name with a business license.
A U.S. government memorandum dated August 2012 says Zadran has never given them proof to back up his claim of mistaken identity, offering instead only "a blanket denial".
A leaked diplomatic cable about a meeting U.S. officials had with United Arab Emirates (UAE) security officials in Dubai in December 2009 shows that U.S. officials have been interested in him for some time.
The aim of the meeting was to discuss suspected Taliban-related financial activity in the UAE and secure more help choking off funds flowing to the Taliban and other militant groups in Afghanistan and Pakistan.
"They were familiar with Haji Khalil Zadran, a Kabul-based Haqqani Network financial facilitator who has visited the UAE, but were not able to provide any details on him," the cable from the U.S. embassy in Abu Dhabi said.
The U.S. military recently refused to blacklist Zadran, despite the efforts by SIGAR and others, saying it had not been given enough evidence and that debarring individuals on the basis of classified information was unfair.
The Afghan chamber of commerce, which does blacklist individuals referred by the government or other countries, said it was investigating Zadran but had not reached a decision.
Special Inspector Sopko has repeatedly urged similar action, most recently in July when SIGAR referred 43 contractors' cases - most of them Afghan - to the U.S. Army seeking their exclusion from the bidding process.
EVERYONE PAYS THE HAQQANIS
Zadran was raised in Paktia, a Haqqani stronghold in the east. His friends and associates say it is unfair to target him because all businesses there have to work with insurgents.
Stretches of road in the region leading to Pakistan are controlled by insurgents who use the routes to fund their activities and even supply foreign troops stationed there.
"It is widely believed among the U.S. military and local members of the business community that truckers associated with the Haqqani network even carry goods shipped to the coalition," wrote Gretchen Peters in her 2012 report for the U.S. Combating Terrorism Center.
It is a widely held opinion.
"We don't have any evidence or documents to say Haji Khalil Zadran is paying insurgents," said Haji Jabar, deputy spy chief for Paktia, when asked about Zadran and his projects there.
"What we can say is that all companies in Paktia, Paktika (a neighbouring province) and Khost are paying for the Taliban to avoid attacks," he said.
The Haqqanis are ethnic Pashtuns from the Zadran tribe in the east and were once sponsored by U.S. intelligence services after its figurehead Jalaluddin gained notoriety as an anti-Soviet mujahideen commander in the 1980s.
Nowadays, effective leadership of the group has passed to Jalaluddin's eldest and more radical son Sirajuddin.
"Under Sirajuddin's command, the network has matured in its level of operational security, grown into a more lethal and criminalised organisation, and diversified its investments into real estate and front companies," Peters wrote in her report.
Back at the offices of Zadran's Haji Khalil Construction Company in central Kabul, Zadran's director Hayatullah Nawabi showed Reuters a list of contracts the firm was hoping to win.
Despite SIGAR's efforts to blacklist Zadran, the company is poised to be awarded an $11 million contract to build an airport in Khost, Nawabi said. (Additional reporting by Samihullah Paiwand in Gardez, Afghanistan and Mubasher Bukhari in Lahore, Pakistan; Editing by Paul Tait)