The Salameh Papers: Full coverage here
The Lebanese judiciary's decision to press charges against former central bank chief Riad Salameh, after a hearing related to the alleged embezzlement of millions of dollars of public funds, caught many off guard.
Images of the man once celebrated as the architect of Lebanon's financial system – which eventually collapsed – escorted by security guards on his way to detention, have stunned the country, as Mr Salameh had long seemed untouchable.
Since 2021, despite mounting local and international legal challenges – including allegations of embezzlement, asset freezes worldwide, several corruption investigations, and an international arrest warrant – his life in Lebanon appeared largely unaffected.
A previous investigation in Lebanon into Mr Salameh's alleged embezzlement at the central bank has been stalled for years, as political factors heavily influence all areas of the country's affairs.
The case that seems to have disrupted the status quo is known as the Optimum case, in reference to Optimum Invest SA, a Lebanon brokerage firm with which the Banque du Liban (BDL) allegedly engaged in shady deals from 2015 to 2018, in an alleged fraud scheme involving embezzlement and manipulation of financial statements.
Mr Salameh, whose term as the BDL governor ended in July 2023, has repeatedly denied the accusations.
"Riad Salameh has always been at the disposal of Lebanese justice. He therefore responded to the summons from the Beirut public prosecutor, just as he had previously responded to all summonses from Lebanese magistrates," his Paris-based lawyer, Pierre-Olivier Sur, told The National on Thursday.
If Optimum is now making headlines, insiders have been aware of blatant irregularities since at least 2015.
Based on leaked documents, exclusive interviews and expert analysis, The National explores the latest scandal at Lebanon's central bank – yet another piece of the puzzle in he country's financial crisis. It is one of the largest collapses in recent history, and is marked by the local currency losing 95 per cent of its value and a large number of Lebanese plunging into poverty.
Slush fund
The Lebanese investigation focuses on BDL and Optimum's dealings between 2015 and 2018. Over those three years, Mr Salameh, in his capacity as central bank governor, and Optimum’s chairman, Antoine Salame, a distant relative who has since left the company, signed 45 contracts, all seen by The National.
These transactions generated about $8 billion, about 15 per cent of the country's gross domestic product, resulting in a massive financial scheme that experts have described as an accounting trick to hide financial losses.
The investigation into Optimum started in Lebanon after revelations from BDL's forensic audit, released by consulting firm Alvarez & Marsal (A&M) in 2023, showed at least $111 million of the total amount was siphoned off as shady disbursement to undisclosed third parties.
The international auditors discovered that the funds generated were channelled into the same consulting account under investigation in Europe for having served as a multimillion-dollar slush fund for Mr Salameh and his family in a prior alleged embezzlement scheme.
The Lebanese judiciary is currently investigating Mr Salameh for the alleged embezzlement of $42 million. It is unclear why the investigation is focusing on only a part of the amount flagged by A&M.
The beneficiaries of these commissions are also under investigation, although their identities are not publicly known. Sources at the BDL told The National that the financial details from the account where the commissions were deposited have been provided to judicial authorities.
'Fake' gains
The entire financial arrangement between Optimum and BDL, which allegedly facilitated the embezzlement of tens of millions of dollars under investigation, has been described as “fraudulent” by financial experts familiar with the case.
Those experts have called the 45 contracts “sham” transactions, creating $8 billion in fake gains to cover losses from unsustainable monetary policies by listing future interest payments as assets – without any real economic value. They were initially uncovered in a confidential audit by the international forensic audit firm Kroll, which was leaked last March.
According to the audit, BDL would lend Optimum money to buy the bonds, and BDL would immediately buy them back at a substantial premium equal to the future interest payments on the bonds. The premium would then be returned to BDL as a commission.
Mr Salameh said the operations with Optimum were in line with the institution's accounting framework. “The income from these operations was not booked as profit but revenue against postponed losses in accordance with the financial chart of BDL,” he said in a July email to The National.
BDL relies on its accounting standards, which diverge from International Financial Reporting Standards. A&M had previously criticised BDL's “non-traditional” accounting standards in its audit for lacking transparency.
“This is a classic accounting scheme,” financial analyst Mike Azar told The National.
“If I sell you a product for $100 and buy it back for $150, that doesn't increase its value to $150. If you return the $50 difference to me, that doesn't make the $50 a profit. All it did was move my own money in a circle for the express purpose of concealing my financial situation by creating fake profits while paying commissions, in this case allegedly to Optimum and other unknown beneficiaries,” Mr Azar said.
Mr Salameh did not comment on the embezzlement allegations about Optimum's commission in his July email to The National. Optimum claims it was unaware of the alleged scheme because it did not ask about it.
The transactions were “unusual”, Kroll auditors said. Still, because Mr Salameh was “highly respected at the time” Optimum's former management said it “did not comprehend questioning its requests and was proud to act on the BDL's behalf”.
“We would like to reiterate that all dealings between Optimum Invest and Banque du Liban were conducted in full compliance with applicable laws and regulation,” Optimum stressed on its website.
'Unscrutinised' management
The dealings between BDL and Optimum appear to have been kept secret from the BDL oversight board. Mr Salameh's management of the BDL has been described as “personalised” and “unscrutinised” in the BDL forensic audit.
Four members of the Central Council told The National at the time that operations with Optimum were never mentioned during meetings of the board, composed of the governor, the four deputy governors and the directors general of the Ministries of Economy and Trade, and Finance.
The fifth member did not respond to The National's request for comment. The sixth member is deceased.
“There has never been any mention of Optimum and we have never seen the contracts,” Alain Bifani, former director general of the Lebanese Ministry of Finance, told The National.
Contracts seen by The National show the BDL board authorised the transactions, referencing various board meetings. However, The National accessed the agendas from these meetings, dated from 2014 to 2016, and found no mention of Optimum.
Buried case
The first time Optimum came under scrutiny was in 2015, when an audit by the Capital Markets Authority (CMA) flagged "extravagant" transactions and unusually high commissions between Optimum and the banking sector. Due to its sensitivity, its findings were kept secret for eight years by the CMA board, led by Mr Salameh.
The CMA recommended barring Optimum's managers from the industry, but nothing happened. Instead, that same year BDL started dealing with the broker, and the contracts continued.
The Optimum arrangement began around the same time the central bank ceased working with Forry Associates Ltd, another brokerage company under international scrutiny and suspected of being a shell company used by Mr Salameh to siphon off funds.
While the allegations against both brokers involve embezzlement through shady transactions and commissions, Optimum, unlike Forry, was not a shell company. It had clients and is still in operation. In June 2020, it was acquired by LIBANK SAL (Levant Investment Bank SAL).
Over the past year and a half, leaks of confidential documents and the publication of the forensic audit have led to the opening of two judicial cases into Optimum in Lebanon. According to Lebanese lawyer Karim Daher, the case began to gain momentum due to the increased scrutiny. But he remains cautious.
“This could all be an attempt by the political class to shift the blame to Riad Salameh, who is already lost, as part of a broader package deal with the international community,” he said. “The question is whether he will accept that he is solely responsible for the disaster of the century or if he will drag others down with him.”
The move also comes amid rising speculation that Lebanon could be added to the Financial Action Task Force (FATF) grey list for countries at increased risk of money laundering. “These are entirely separate issues,” a foreign diplomatic source told The National. “Mr Salameh's arrest would not, in any way, impact the FATF's process.”
