Iraqi Cabinet removes central bank head amid allegations of financial wrongdoing

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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.

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Associated Press writers Qassim Abdul-Zahra, Sinan Salaheddin, Sameer N. Yacoub and Bushra Juhi contributed reporting.