Samia Nakhoul & Timour Azhari

BEIRUT, Reuters – The central bank of Lebanon charged commercial banks with country commissions for buying government securities. However, it did not make clear that most of these commissions were paid to a brother of its governor. According to documents seen to Reuters,

Four transactions between Banque du Liban, (BDL), and a Lebanese Commercial Bank were examined by Reuters. These contracts date back to 2004. Two senior finance executives told Reuters that such agreements were common in commercial banks at the time. 

Reuters did not see any mention of Forry Associates in the contracts. Raja Salameh, the brother to central bank governor Riad Salameh, controls this company. Riad Salameh, a November interviewee with Reuters, stated that the company eventually received these commissions. Raja Salameh, his brother, was not available for comment.

Riad Salmeh stated that Forry was “only responsible for collecting all fees and commissions, and redistributing according to instructions.” He didn’t specify the specific instructions. Salameh claimed that all commissions were transparent and had been approved by central bank board members. No one made any complaints.

BDL spokeswoman Halim Berti said that the central bank board couldn’t answer any questions concerning its decisions as the governor had the authority to do so. 

Investigations in Europe and Lebanon are ongoing into the commissions and their locations.

According to a letter sent by the Swiss attorney general to Lebanese officials in 2015 and seen by Reuters, the Swiss suspect that the Salameh brothers illegally took more than $300,000,000 from BDL in this manner between 2002-2015. They also may have laundered some of it in Switzerland.

The Swiss attorney general told Reuters that it was conducting a criminal investigation into the suspicions of “aggravated cash laundering related to alleged theft offences to detriment to BDL”, but refused to comment on this story. 

Salameh claimed that such commissions, like those seen in Reuters’ contracts, were paid To Forry. Salameh denies any embezzlement and says that none of the money from commissions belonged to the central banking, which is a public institution.

He explained to Reuters that the commissions had been paid into a central bank “clearing” account and were then paid back to Forry. He said he hired the audit firm BDO Semaan, Gholam & Co to look into the matter. Salameh said that the auditor’s report concluded that no funds from BDL were in this account. The report was not shown to Reuters by Salameh. BDO Semaan declined comment.

However, Reuters has seen details of contracts that show the commissions would have to go to BDL. This is not known before. The following three contracts were written in Arabic on paper with the letterhead of the central bank. They state that “We authorise you to deduct 3/8th of 1%” and “you” refers to central bank. Forry is never mentioned in any contract. 

Five Lebanese people with senior financial positions and direct knowledge about such contracts said to Reuters that they were unaware of Forry’s existence until last year, when the Swiss investigation was published. 

Salameh stated that BDL had a relationship with Forry since 2002. According to Salameh, six other firms provided services similar to those of the central bank. When Reuters asked him about the names of these firms, he said that he would not. 

INVESTIGATION HIT RESISTANCE

Experts believe it is common for central bank to charge commissions for certain transactions. The money is usually paid directly to central banks, which helps them to fund their operations and lessen dependence on public funds. It would be strange and not in the spirit of imposition to charge such fees for sending out commissions to other parties, they claim. 

These are obviously public funds because Forry would not have been paid the commission if he had. However, Mike Azar, an economist who is knowledgeable about Lebanon’s financial system, and a former professor of economics at Johns Hopkins University, the United States, stated that “these are clearly public resources” 

Since 1989, Salameh (71) has served as the governor of Lebanon’s central bank. Since the financial crisis in 2019, public scrutiny has grown towards Salameh. Although once highly-regarded for his management of the banking system’s finances, many now believe he was responsible for the fall in value of the Lebanese pounds and consequent impoverishment of most Lebanese. Salameh denied any responsibility and blamed politicians, who he claims oversaw years of extravagant spending. 

Salameh has still the support of many of Lebanon’s most powerful politicians including Nabih Mikati, Prime Minister Najib Mikati and Parliament Speaker Nabih Brerri.

Lebanese prosecutor Jean Tannous told Reuters in November he was investigating Salameh on suspicion of embezzlement of public funds, illicit enrichment and money laundering. However, his probe has met resistance. 

Four people with knowledge of the investigation claim that Tannous has not been allowed access to accounts information by commercial banks. This is despite the fact that the bank refused to provide the necessary data, and citing 1950s banking secrecy legislations. According to the people, the banks instructed Tannous that he should ask the Special Investigation Commission of the Central Bank (SIC) for the information. This commission is led by Salameh.

Tannous did not respond to a request for comment. Tannous declined to comment on this story.

Ghassan Oueidat was the Lebanon’s chief prosecutor. He prevented Tannous from participating in a Paris meeting for European prosecutors to share and coordinate information about Salameh. This correspondence, which was seen by Reuters, is between Oueidat as well as a Eurojust member, the European Union penal justice agency, and Reuters. Oueidat, Eurojust and other officials declined to comment.