Accused of enriching himself and his inner circle through years of corruption

The Governor of the Central Bank of Lebanon faces many “allegations”

  • The late Prime Minister Rafic Hariri chose Salameh to head the Central Bank.

    From the source

  • Central Bank Governor Riad Salameh on a hot tin.

    From the source

  • Demonstrations due to the collapse of the economy.

    From the source

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For decades, the Governor of the Central Bank of Lebanon, Riad Salameh, has been praised from home and abroad, as a financial genius who has maintained the continuity of the economy and the stability of the currency, despite the wars, assassinations and recurring political turmoil that the country is witnessing from time to time.

Now the country, at a crossroads in the Middle East, is facing a crippling economic crisis with largely insolvent banks, rising unemployment and a currency that has plunged to rock bottom, and many Lebanese blame Salama for a lack of basics that has made them struggle to buy food. They scramble to get medicines, and wait in long lines to refuel their cars.

Accusations of corruption from abroad

Salame is under accusations of enriching himself and his inner circle through years of corruption. Anti-corruption judges in Paris opened an investigation this month into criminal allegations that Salameh - one of the world's longest-serving central bank chiefs - amassed an enormous fortune in Europe by abusing his power.

The judicial investigation follows a preliminary investigation by the French National Financial Prosecutor's Office, in which prosecutors in Switzerland have asked the Lebanese authorities to assist in a separate investigation into suspected embezzlement and money laundering linked to Salameh and his associates.

These allegations caused a sensation in a country suffering from an economic downturn, which made the World Bank finally believe that Lebanon may rank first among the top three in the world in this regard, over the past 150 years, a recession "usually associated with conflicts or wars."

Despite the collapse, Salameh, the architect of Lebanon's monetary policy since 1993, has not faced serious calls to leave his post, although he has overseen a strategy that requires more borrowing to settle the dues of existing creditors, which some critics have described as the biggest "Ponzi" in the world. The world, referring to the fraudulent Ponzi scheme, which promises investors and customers high rates of return and low risk in order to pay old investors.

A brilliant and cunning man hides behind secrecy

What protects Salameh from internal scrutiny is his central role in the web of corrupt business and political interests in Lebanon.

In more than 20 interviews with Lebanese and Western officials, monetary and economic officials, and former colleagues of Salameh, they paint a picture of a brilliant and cunning man, but shrouded in secrecy, who built an empire within the central bank and used it to make himself a necessary component of the rich and powerful, and of players across the Lebanese political spectrum.

"He is no longer the head of the Central Bank, but has become the accountant for this mafia," said Jamil al-Sayed, the former head of the Lebanese General Security Service, the body that oversees internal security and the issuance of identity cards and passports. "He protects them, and they protect him, to protect themselves."

But investigations in France and Switzerland pose new threats to his standing, as French judges are investigating a complaint filed by the French anti-corruption group Sherpa, which accuses Salama, his brother Raja Salameh, and other relatives, and Marianne Howayek, who heads the executive office of the Central Bank, of illegally transferring funds from Lebanon to Swiss banks, then washed up in France by buying high-end real estate, including luxury properties near the Eiffel Tower.

The judges have broad powers, including cooperation from the Lebanese authorities, and freezing assets if the source of their funding appears illegal.

money laundering

Salameh's lawyer in France, Pierre-Olivier Sur, says Salameh disputes all of the allegations.

Separately, the Swiss attorney general's office is examining a network of bank accounts stretching from Switzerland to Panama, and says Salameh and his brother may have used the network to harbor "possible embezzlement" of central bank funds and "to carry out money laundering".

Swiss prosecutors say documents show that Salameh hired Fawry Associates, a brokerage firm owned by his brother, to handle central bank sales of government bonds, and that from 2002 to 2015, the bank transferred at least $330 million in commissions into an account The company is in Switzerland.

Salameh says the contract was legal.

Swiss prosecutors say large sums of money in the Forie Associates account were transferred to Swiss accounts owned by Salameh, and part of the money was eventually used to buy real estate worth millions of euros in France, Germany, Britain and Switzerland.

Beyond real estate, Swiss prosecutors are looking into allegations that Salameh transferred more than $200 million from a "Swiss Faw" account to his accounts in Lebanese banks with strong political ties.

Among them was Bank Med, owned by the family of former Lebanese Prime Minister Rafik Hariri, who appointed Salameh as head of the central bank, and his son Saad Hariri, the country's most prominent Sunni politician.

Neither Swiss nor French prosecutors have charged Salameh, his brother or his aides so far, and it is unclear how long the investigations will take.

popular talk

Talking about the shady practices of a trader's safety years ago.

In diplomatic cables to WikiLeaks, the former US ambassador to Lebanon, Jeffrey Feltman (now special envoy for the Horn of Africa), described Salameh in 2007 as “rumored for his corrupt behavior, penchant for secrecy, and illegal independence in the Central Bank.”

Salameh told CNBC last year, before the investigations were announced, that he would not resign because of Lebanon's financial problems, because he had "a strategy to get out of this crisis."

He defended his record, saying that he kept Lebanon "afloat while it was living through wars, assassinations, civil war, and so on."

"It is really unfair to judge Lebanon as if it were Sweden," he said.

But some Lebanese are wondering: How can Salameh remain at the helm of the Central Bank at a time when the World Bank asserts that inflation has risen to 80%, foreign investors have left the country, and perhaps more than half of the country's population, numbering 6.7 million, lives below the poverty line .

"He is responsible for the failure of monetary policy, which failed miserably," says the former advisor to the Lebanese Finance Minister, Henry Saul, who resigned last year.

Lifesaver safety

Salameh, a witty and polite politician with dual Lebanese-French citizenship, has been in the midst of Lebanese politics since Rafik Hariri appointed him governor of the Central Bank in 1993. He was Hariri's private banker at Merrill Lynch.

Hariri was trying to rebuild Lebanon after a disastrous 15-year civil war, and Salameh set out to stabilize the currency and attract foreign investment.

He set the safety of the Lebanese pound at 1,500 to the dollar, a peg that would support the economy for more than 20 years, but would require a steady influx of dollars to be sustainable.

But the system remained fragile, as it could risk collapsing when the money runs out.

Every time Lebanon faced new crises, the flow of foreign aid continued. The Hariri assassination in 2005 and the devastating war between Lebanon's Hezbollah and Israel in 2006 brought in inflows of international aid, and the wealthy in the Lebanese diaspora were constantly sending foreign currency home. .

Salameh's supporters praised him as a skilled savior who maintained the stability of the economy in a country that lacks everything.

Governments came and went with chronic budget deficits, but Salameh remained in control.

Looking forward to the presidency

In the Lebanese political system based on sects in Lebanon, the president must be a Maronite Christian, and it seems that Salameh's reputation made him at one time compete for this high position, as the financial mastermind. "Give me the presidency and I'll tell you," he once told a businessman who asked him about his economic plans. Salameh also used his position to provide services to power brokers in the Lebanese political system, according to former central bank employees and foreign officials who spoke on condition of anonymity. The children of prominent officials got jobs at the Central Bank. Loyal businessmen, politicians, and journalists are alleged to have benefited greatly from central bank-backed loans and other financial arrangements.

But after decades of relative stability, Salama's system is beginning to fall apart.

By 2015, the Lebanese debt-to-economic output ratio - a measure of the debt burden on a country's economy - was the third highest in the world, at 138%.

When Salameh took office, the percentage was 51%, ranking 97th.

• Despite the collapse, Salameh, the architect of monetary policy in Lebanon since 1993, did not face serious calls to leave his post, although he oversaw a strategy that required more borrowing to settle the dues of current creditors, which some critics described as the biggest “Ponzi.” In the world.

• What protects Salameh from internal scrutiny is his central role in the network of corrupt commercial and political interests in Lebanon.

• Some Lebanese are asking: How can Salameh remain at the head of the Central Bank at a time when the World Bank confirms that inflation has risen to 80%, foreign investors have left the country, and perhaps more than half of the country's population, numbering 6.7 million, lives below the poverty line ?

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