Ex-US diplomat Khalilzad contests financial probe

AP News
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Posted: Sep 08, 2014 4:46 PM
Ex-US diplomat Khalilzad contests financial probe

WASHINGTON (AP) — A former U.S. ambassador to Afghanistan, Iraq and the United Nations has been caught up in a suspected money-laundering inquiry that led to a freeze on bank deposits he and his wife hold in Austria.

Austrian officials said Zalmay Khalilzad, the founder of a global consulting group, was being investigated for suspected money laundering related to business activities in Iraq and the United Arab Emirates. The case became public after a blogger found documents while rummaging through a garbage can used by the state prosecutor's office in Vienna.

However, few other details are known about the case.

The U.S. Justice Department in May 2013 asked Austrian authorities for records regarding the Viennese bank accounts of Khalilzad's wife, Cheryl Benard, according to a statement by Khalilzad's U.S. lawyer, Robert B. Buehler. Austrian authorities then froze the accounts.

Khalilzad strongly contested the decision to freeze his and his wife's accounts, saying it was an overreaction to a routine request for information by the Justice Department to Austrian officials.

The Austrian state prosecutor, Thomas Vecsey, confirmed the blogger's report in the Austrian weekly Profil, which said the inquiry centers on the alleged transfer of $1.5 million to an account belonging to Benard.

Buehler noted in a statement that no charges have been filed against Khalilzad or Benard..

"The DOJ request for information did not seek the seizure of assets belonging to Ms. Benard or Ambassador Khalilzad, nor did the DOJ ask Austrian authorities to seize any of their accounts," the law firm said in a statement. "However, for reasons that remain unclear, an Austrian prosecutor ignored the plain language of the DOJ request and froze Ms. Benard's accounts solely on the basis of the DOJ's request for information."

The law firm said the Justice Department request did not contain any evidence of money laundering or other offenses, and that the Austrian prosecutor had not developed any evidence of his own to support the seizure of the accounts.

Justice Department spokesman Peter Carr declined to comment Monday.

Benard's lawyer in Vienna, Holger Bielesz, said Austrian authorities ordered several bank accounts owned by Benard frozen in February, about 10 months after the Justice Department asked for Austria's help. That ruling is now under appeal.

Bielesz said the U.S. request did not specify the grounds for the investigation, but that it appeared to be looking for evidence of money laundering. The lawyer also argued that Austrian authorities had over-reacted in freezing Benard's bank accounts because the Justice Department had not yet offered "reasonable grounds for suspicions."

Bielesz declined to go into details about the investigation, saying that at this point he was representing only Benard and her attempts to get full access to the funds in her accounts.

Khalilzad was born in Afghanistan and went to the United States as an exchange student. He later became a professor and served various ambassadorships under President George W. Bush. He was the U.S. special presidential envoy to Afghanistan from 2001 to 2003, then U.S. ambassador there until 2005. He was the ambassador to Iraq from 2005 to 2007, and the U.S. permanent representative to the United Nations from 2007 to 2009.

Khalilzad played a key role in the political transition in Afghanistan after the 2001 U.S.-led invasion and the fall of the Taliban. He took center stage organizing the traditional grand councils that would eventually approve Afghanistan's constitution.

The State Department had no comment on the case.

In the private sector, Khalilzad is founder and president of Gryphon Partners, which advises companies and wealthy individuals on business opportunities in several industries and regions, including high-risk territories.

He sits on the boards of the National Endowment for Democracy, America Abroad Media, the Mideast studies center at Rand Corp., the American University of Iraq and the American University of Afghanistan. He also is a counselor at the Center for Strategic and International Studies, and writes about foreign policy issues and frequently appears on U.S. news shows.

Khalilzad earned both a bachelor's and master's degree from the American University of Beirut and a doctorate from the University of Chicago.

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Associated Press writer George Jahn contributed from Austria.