Today, SIGAR released a letter to the Overseas Private Investment Corporation (OPIC) highlighting serious deficiencies in the management and oversight of $85 million in OPIC loans made for the construction of a major hotel and apartment building near U.S. Embassy Kabul.
The letter notes:
— The $85 million in loans is gone, the buildings were never completed and are uninhabitable, and the U.S. Embassy is now forced to provide security for the site at additional cost to U.S. taxpayers.
— Both buildings now appear to be abandoned empty shells, and both loans are in default, possibly as the result of fraud.
— SIGAR inspections found structural cracks in the walls and roof; damaged fireproofing on steel beams and columns; demolished wall sections; incomplete electrical, elevator, communications, fire prevention/suppression, sewer, heating, ventilation, and air conditioning systems; unfinished concrete masonry units; uninstalled doors and windows; and, many other problems.
— Based on our inspection is clear that the assurances made by the loan recipient to obtain the final loan disbursement for the hotel, bringing total loan disbursements to $58 million, were false and misleading.
— Although OPIC’s website still lists the apartment building as an active project, we found that after $27 million in OPIC loan disbursements the project was never finished, and representations made to OPIC that the building could open by August 2013 were blatantly false and unrealistic.
— Because OPIC did not have an on-site supervisory or monitoring presence at either construction project, OPIC had to rely almost exclusively on representations made by the loan recipients regarding the status of the projects and how the disbursed loan proceeds were spent.
— OPIC hired Gardiner & Theobald to monitor the apartment project. Ironically, Gardiner & Theobald never visited the apartment project site.
— The failure to properly manage and oversee these loans may indicate systemic problems in the management and oversight of OPIC loans for other projects in Afghanistan and elsewhere around the world, putting additional millions of dollars at risk.
— Given that these projects have apparently been abandoned for the last three years, we encourage OPIC to take immediate action to recoup the loan funds from the recipients.