Riad Salameh's detention extended after first hearing in embezzlement case

Former head of Lebanon's central bank has been in custody since last week over alleged theft of public funds

Protesters and media personnel gather near a vehicle from the convoy of former Lebanese central bank chief Riad Salameh as it arrives at the Justice Palace in Beirut, on September 9, 2024. Reuters

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Beirut's chief investigating judge issued an arrest warrant against Lebanon's former central bank chief Riad Salameh on Monday after the first hearing session in a case involving the alleged embezzlement of $42 million.

The arrest warrant permits the judiciary to detain Mr Salameh beyond the expiration of the initial legal arrest period, which ended on Monday. According to the country's state-owned National News Agency, Judge Bilal Halawi has scheduled a second session for Thursday, after which he could either release or keep him in detention for up to a year.

Bilal Halawi was tasked with investigating Mr Salameh after financial prosecutor Ali Ibrahim brought charges of “embezzlement, theft of public funds, forgery and illicit enrichment” against him on Wednesday. He has been in custody since then.

The probe is widely known as the Optimum case, referring to the company Optimum Invest SA. Mr Salameh is accused of allegedly embezzling at least $42 million through a significant scheme involving deals with the Lebanon brokerage firm between 2015 and 2018.

Mr Halawi is tasked with gathering evidence and submitting it to the Chamber of Indictment, which will then decide whether to initiate a trial, a process that could take months.

Mr Salameh, whose term as the BDL governor ended in July 2023, has denied the accusations. He told The National in a July email that the operations with Optimum were in line with the institution's accounting framework.

Optimum claimed it was unaware of the alleged scheme and that “all dealings between Optimum Invest and Banque du Liban were conducted in full compliance with applicable laws and regulation”.

'Pandora box'

After three decades as the head of the BDL, Mr Salameh – who was once praised as the guardian of Lebanon's financial sector – is facing a host of legal action, including an Interpol notice and an arrest warrant in France related to accusations of embezzling more than $330 million from the BDL in a separate case.

He is the highest-ranking official to be arrested in the wake of Lebanon's unprecedented financial collapse, which destroyed the value of the local currency, locked most Lebanese out of their life savings, and pushed large segments of the population into poverty.

The move caught many off guard, as a separate investigation into the central bank governor had been stalled amid political pressure for years.

“I see three main reasons,” Lebanese lawyer Karim Daher told The National.

“The Lebanese establishment might have been obligated to react due to increased pressure from the international community, particularly with the FATF's upcoming decision and the risk of Lebanon being greylisted. There is also pressure from the international judiciary, with the French prosecutors visiting Beirut just a month ago.”

Mr Daher also said he does not rule out attempts to “scapegoat” Mr Salameh locally by political parties that may have an interest in seeing him fall.

The entire financial arrangement between Optimum and the BDL, which allegedly facilitated the embezzlement of tens of millions of dollars, has been characterised by experts as an accounting fraud scheme designed to fabricate $8 billion in fake gains to hide massive losses.

Yet, this is not part of the investigation.

“There may be a strategy to focus solely on the embezzlement case, avoiding the broader scheme of financial statement manipulation, which could have on the one hand deeper implications for the central bank as an institution and on the other hand may open a Pandora's box to incriminate other stakeholders either politicians or bankers,” Mr Daher said.