Suspension of Lebanon probe into Riad Salameh’s wealth unprecedented, judge says

FILE PHOTO: Demonstrators carry Lebanese flags and a banner depicting Lebanon’s Central Bank Governor Riad Salameh, as they head towards the central bank building during an anti-government protes. The banner reads Riad el Harami ( thief) instead of Riad Salameh (Photo: Reuters)

The judge investigating Lebanon’s central bank governor Riad Salameh on suspicion of illicit enrichment has described a lawsuit that forced the suspension of his probe as “unprecedented”.

It comes amid rising tensions between the country’s judiciary and political and financial elite.

The investigation by Judge Jean Tannous began in January, after one of several European countries that are looking into Mr Salameh’s substantial wealth asked for co-operation from judicial authorities in Lebanon.

Mr Salameh, 71, the central bank chief since 1993, was once highly regarded but has faced increasing scrutiny after the country’s economic collapse that began in late 2019.

The meltdown, which the World Bank has called one of the worst in the world since the industrial revolution, robbed many Lebanese of their life savings and caused skyrocketing levels of poverty.

Mr Tannous was forced to suspend his investigation after one of the four Lebanese banks he sought as witnesses filed a lawsuit filed on November 3, reportedly accusing him of gross misconduct. He is now awaiting a decision on the matter by one of the top Lebanese judicial bodies.

“Filing a case against a judicial request during a preliminary investigation is unprecedented,” Mr Tannous told The National.

The judge had sought information on bank accounts belonging to Mr Salameh’s brother, but banks say that there are differing viewpoints in the interpretation of Lebanese laws regarding conditions allowing the lifting of banking secrecy.

Local watchdog Legal Agenda said the lawsuit was yet another attempt to intimidate judges who are trying to hold Lebanon’s ruling class – widely perceived as corrupt and responsible for the crisis – accountable. The UN Special Rapporteur lambasted officials during a visit to Lebanon last week, saying they were busy “evading accountability”.

“The judge is faced with lawsuits because he suspects influential people, just like in the investigation into the Beirut port blast,” said lawyer Ghida Frangieh, a member of Legal Agenda. Lebanon’s elite are “buying time, crippling the judiciary, and sending a message to judges: if you come after us, we’ll go after you personally,” she said.

A judicial probe into the deadly explosion at Beirut’s port on August 4 last year was put on hold for the third time on November 4. There are 11 lawsuits against the investigating judge, Tarek Bitar, all filed by former ministers and MPs.

Mr Salameh’s wealth is reportedly under investigation in France, Luxembourg, Germany, Liechtenstein and Switzerland. Lebanon’s public prosecutor launched a probe after Switzerland sent a request for judicial co-operation to the Justice Ministry in November last year.

Swiss investigators suspect Mr Salameh of having embezzled $330 million from the central bank between 2002 and 2015 under the guise of payment to Forry Associates Ltd, a company registered in the British Virgin Islands and managed by his brother, Raja Salameh. Forry allegedly acted as a broker in the bank’s sale of treasury bills and the money was transferred to Switzerland.

Swiss authorities believe that $200m may have then re-entered the Lebanese banking system and was also used in part by Mr Salameh and his associates to purchase real estate in Europe, reports say. Mr Salameh has been questioned twice in Lebanon, while his brother was questioned once in Lebanon and once in France.

In early October, the investigating judge asked Banque Audi, BankMed, Banque Misr Liban and Credit Libanais for details of accounts belonging to Raja.

A 1956 law allows any judicial authority to request banks details without the need to lift banking secrecy in suspected cases of illicit enrichment.

But Lebanese media reports said the banks told Mr Tannous that the only institution allowed to lift banking secrecy was the central bank’s special investigation commission headed by its governor, citing a 2015 law on fighting money laundering and terrorist financing.

The probe was automatically suspended after former minister and lawyer Rashid Derbas, acting on behalf of BankMed, filed a lawsuit against the investigating judge.

Mr Derbas did not respond to a request for comment.

Mr Tannous said the matter was now in the hands of the general assembly of the Court of Cassation, which has no time limit to come to a decision.

The general assembly’s decision could have a ripple effect on Lebanon’s tight banking secrecy laws. The sector’s opacity, combined with close relations between politicians and banks, reportedly allowed the elite to send millions of dollars out of the country at the start of the financial collapse while average Lebanese were banned from doing so.

“Banking secrecy is one of the pillars of [Lebanon’s] impunity regime, so we must lift it and restrict it to the maximum,” said Ms Frangieh.

Two of the banks involved told The National that clarifying the interpretation of the law regarding banking secrecy was essential.

Zeina Zamel, head of marketing and communications at BankMed, said in an email that the bank had recently resorted to “one of the highest judicial authorities in Lebanon” for a decision “on a legal matter related to the conclusive determination of the competent authority authorised to lift banking secrecy”.

BankMed did not confirm or deny “the existence of any relationship with any third party or any investigation directly or indirectly related to the same.”

Bank Audi, the only other bank to respond to a request for comment, said there was “a difference of views over the interpretation of a legal point pertaining to the applicability of banking secrecy in the context of illicit enrichment cases in light of the applicable laws, particularly law 44/2015 on combating money laundering and terrorism, which provided the special investigation committee with the exclusivity over the lifting of banking secrecy on clients’ accounts.”

The word “exclusivity” was underlined and written in bold.

The central bank governor has repeatedly said that his fortune came from his previous job at investment bank Merrill Lynch and from inheritances. On Wednesday, he issued a statement attacking “opponents” who “misled public opinion by spreading false rumours”.

Mr Salameh then told a local television channel that he had asked the Lebanese company BDO, Semaan, Gholam & Co to audit his accounts. On Friday he said he had handed the audit report to Prime Minister Najib Mikati “to refute all we hear and read, all the rumours”.

But financial experts say the audit is actually an “agreed-upon procedures engagement” that requires Mr Salameh to hand over only information of his choosing.

The client “specifies the areas that need to be verified”, said a Lebanese certified public accountant who asked to remain anonymous due to the sensitivity of the subject.

“He can ask to verify some assets and not others.”