The former head of Lebanon’s central bank, Riad Salameh, appeared in court on Monday for the first time since he was arrested last week on charges of embezzling up to $42m (£32m) of public funds.
Monday’s hearing is the latest in the long saga of Salameh, once vaunted as a financial wizard who earned Lebanon its reputation as the “Switzerland of the Middle East” during his 30-year tenure. He has since fallen into disrepute and is suspected of engineering a country-wide Ponzi scheme that caused Lebanon’s 2019 financial meltdown and its five-year-long economic crisis.
Salameh is accused of concealing massive embezzlement from the central bank through creative accounting and by offering interest rates up to 20%, which consistently attracted new capital. In 2019, a run on the banks brought the years-long scheme to an abrupt halt.
Millions of people lost their life savings in the resulting financial crisis and the country’s currency depreciated by more than 95%. Lebanon is now primarily a cash economy as the government has yet to pass a financial recovery plan which would revive the now insolvent banking sector.
Salameh is charged with embezzlement of public funds, robbery of governmental assets and falsifying records and fraud, according to an informed judicial source, who added that the charges carried a maximum penalty of 10 years in prison. Salameh pleaded not guilty on Monday.
The investigative judge scheduled a second hearing for next Thursday and said Salameh would remain in detention until then.
“The client [Salameh] was very clear today by clarifying all the factual things that were contradictory to the false allegations related to this case,” said Mark Habka, Salameh’s lawyer.
Lebanon’s state news agency said the charges were in relation to alleged misconduct with the brokerage firm Optimum Invest, which Salameh is accused of using to enrich himself by more than $110m.
Salameh allegedly sold bonds to Optimum, bought them back at a mark-up, and then recorded the increase in bond price as profit for personal enrichment and to offset losses on the central bank’s balance sheet, an investigation by The National revealed.
Optimum has said that all of its transactions with the central bank were lawful.
Lebanese people reacted to news of his arrest with fanfare, and pictures of Salameh being escorted by officers were widely circulated on social media. A group of depositors staged a protest in front of Lebanon’s Palace of Justice, chanting “thief!” as Salameh arrived for his court hearing.
“Holding Salameh responsible and accountable and detaining him for whatever crimes he’s done with other politicians and bankers is very important, even though we’re still very sceptical,” said Dina Abou Zour, a lawyer with the Lebanese Depositors Union.
The sight of a public official being held accountable is rare in Lebanon, which has become notorious for corruption and impunity. Another investigation into Salameh and his brother, Raja, for allegedly embezzling $330m from the central bank through a shell company, Forry Associates, was previously dismissed by the country’s judiciary.
Salameh also faces six European probes for financial misdeeds and has an Interpol red notice out for his arrest. The Lebanese authorities have not acted on the international notice.
Despite initial celebration over Salameh’s arrest, there are doubts over the judiciary’s willingness to carry out a fair trial due to procedural irregularities in the case.
The judicial source pointed out that the charges brought against Salameh have a three-year statute of limitations, which could lead to the case’s dismissal given that the Optimum scheme ended in 2018.
“There are no charges related to money laundering, which has no statute of limitations,” the source said.
