Iraqi Cabinet removes central bank head amid allegations of financial wrongdoing

BAGHDAD –  Iraq abruptly removed the  longtime governor of the country’s central bank Tuesday after he and other bank  officials were targeted in an investigation into alleged financial  wrongdoing.

The governor, Sinan al-Shabibi, is seen as a politically independent  economist who has led the bank since shortly after the U.S.-led invasion. He has  not been charged with any crime, and his lawyer insists he is innocent.

The allegations, drawn up by a special parliamentary committee established to  investigate the bank, could give new ammunition to critics of Prime Minister  Nouri al-Maliki that the Iraqi leader is trying to consolidate control over the  country’s institutions.

Iraq’s Cabinet voted Tuesday to temporarily replace al-Shabibi with  Abdul-Basit Turki, the head of the Board of Supreme Audit, until the  investigation is complete, according to Ali al-Moussawi, a spokesman for the  prime minister.

Iraq’s Integrity Commission, the country’s anti-corruption watchdog, is  investigating the allegations.

“The committee in charge of this … found shortcomings in the work of the  central bank and these findings were sent to the Integrity Commission, which has  decided to withdraw power from al-Shabibi,” al-Moussawi said.

The investigation deals at least in part with alleged irregularities  involving the exchange of Iraqi dinars for hard currency, according to  al-Moussawi and Haitham al-Jabouri, a lawmaker involved in the probe.

About 16 bank employees are targeted in the investigation, al-Jabouri said.  He said he expects arrest warrants against some could be issued soon.

Before becoming bank governor in 2003, al-Shabibi worked for more than two  decades for the United Nations Conference on Trade and Development.

One of his lawyers, Waleed Mohammed al-Shabibi, defended the governor’s  innocence. The lawyer described himself as a relative of the governor.

“These charges are politically motivated. Al-Shabibi is honest and  professional,” said the lawyer. “The government is planning to replace him with  another official who takes orders from the government.”

Al-Moussawi, the prime minister’s spokesman, denied the charge, saying there  was no political motivation behind the move.

The bank governor himself could not immediately be reached for comment. His  lawyer said al-Shabibi is out of the country. He declined to say where.

Spokespeople for the central bank said they are not authorized to discuss the  allegations.

Iraq has rapidly increased its oil output following years of war and neglect,  and that has translated into a sharp rise in hard currency reserves. The country  earlier this year surpassed next-door Iran as OPEC’s second-largest oil  producer, and its currency reserves recently topped $60 billion.

But the bank’s efforts to keep the dinar stable through its sales of dollars  to local banks have come under pressure, particularly over the past year.

Mudhhir Mohammed Salih, the bank’s deputy governor, said in January that he  believed the civil war in neighboring Syria and international sanctions against  Iran had caused a jump in demand for dollars sold by Baghdad.

He said opportunistic businessmen were buying up dollars and then reselling  them on the black market to customers across the border, sucking greenbacks out  of the country and making it harder for the bank to keep Iraq’s dinar stable.  The bank aims to keep the local currency set at close to 1,200 dinars per  dollar.

Salih separately confirmed he is among those being investigated, but said he  has no further details.