Riad Salameh greets the employees on his last working day at the head of the Central Bank in Beirut, Lebanon, on July 31, 2023. Salameh was arrested after a Sept. 3, 2023, hearing about the bank's dealings with Optimum Invest, a Lebanese firm that offers income brokerage services. Salameh served as governor of the Central Bank for 30 years. Photo by Wael Hamzeh/EPA-EFE
BEIRUT, Lebanon, Sept. 16 (UPI) -- Riad Salameh, Lebanon's former Central Bank governor who stepped down last year after remaining in his post for three decades, has become the first high-ranking official to be put behind bars on corruption and embezzlement charges since the 2019 financial crisis that led to the collapse of the country.
Salameh's arrest Sept. 5 came as a surprise, raising speculation and suspicion over whether that could be the beginning of a long-awaited process to expose all those responsible for the dramatic fall of Lebanon, according to legal and financial analysts.
The 74-year-old, dubbed as the "untouchable" and the "black box" of the corrupt ruling political elite and profiteers, is not the only culprit in Lebanon's dramatic economic and financial crash, which was described by the World Bank as one of the worst economic crises globally since the mid-19th century.
He is, however, seen as the "master of the game" after he engineered a Ponzi scheme that led to the state bankruptcy, millions of people losing their life-time savings and the depreciation of the Lebanese pound by 95%.
The fresh charges brought against Salameh have kept him in detention this time. They include illicit enrichment and embezzlement of up to $42 million of public funds -- a tiny portion of around $100 billion to $130 billion of squandered depositors' money and public funds.
The $42 million was a part of commissions worth more than $110 million in suspicious transactions linked to a Lebanese financial company, Optimum Invest. Salameh and Optimum Invest deny any wrongdoing.
Was his arrest meant to prevent his trial outside Lebanon? Salameh, who also holds the French citizenship, is being investigated, along with his brother, Raja, in at least five European countries for financial misdeeds involving hundreds of millions of dollars. The Salamah brothers denied the accusations.
Another possible reason for his detention was the attempt to ease mounting international pressure on Lebanon and the risk of placing it on the "grey list" by the Financial Action Task Force in October for failing to implement anti-money laundering and counter-terrorist financing measures.
The "grey list" would be another blow to the country's financial system, interrupting capital flows and causing drops in credit ratings.
Would that mean that Salameh was abandoned by his proteges to become the scapegoat?
This is unlikely, at least for the time being. Sacrificing Salameh, who will likely not stay silent in that case, would mean exposing all those who amassed huge fortunes over the past three decades at the expense of the Lebanese people.
"The political elite has no interest in keeping him in jail because they are up to their neck in the corruption and in ruining Lebanon," a judicial source, who requested not to be named, told UPI.
Lebanon ranks among the most corrupt states in the world with senior political leaders and their cronies using state resources to amass huge fortunes smuggled into secret offshore tax havens.
Nizar Saghieh, a lawyer and executive director of the local rights-based organization The Legal Agenda, said that the arrest of Salameh is by itself an important step that should not be underestimated, but most likely will not constitute a breakthrough.
"It is most likely related to big international pressures being exerted on Lebanon and an attempt [by the authorities] to contain them," Saghieh told UPI. "As if they are trying to show to the world that they are pursuing money laundering cases... a kind of a goodwill gesture."
Saghieh thus viewed it as "a very small breach in the wall that won't change much," but could become bigger and "turn into a snowball," depending on how the judges act.
All eyes are on investigative judge Bilal Halawi, who his continuing his probe after he interrogated Salameh and decided to keep him detained.
The question remains whether Halawi will be able to proceed with the case without the usual political interferences?
Imad Salamey, a senior Middle East policy adviser and associate professor of political science and international affairs at Lebanese American University in Beirut, said he considered Salameh's trial as "a significant first step" in scrutinizing the reasons behind Lebanon's financial and banking collapse and holding accountable those responsible for the country's economic mismanagement.
"Salameh's role as the Central Bank governor places him at the heart of Lebanon's financial downfall, and a fair trial should examine his responsibility in the ongoing crisis," Salamey told UPI.
While his trial could be viewed as a move toward holding public officials accountable for greater offenses, it may also serve to restore some degree of public confidence in the judicial process, he noted.
"However, Lebanon's judiciary is deeply influenced by political and sectarian forces, which compromises its independence," he argued, noting that its lack of autonomy is evident in other significant cases, such as the investigation into the Aug. 4, 2020, Beirut port explosion and the 2005 assassination of Lebanese Prime Minister Rafic Hariri, "where political interference has hindered justice."
Saghieh cautioned that if Salameh is released on bail, he could use Article 751 of Lebanon's Code of Civil Procedure, which allows plaintiffs to take legal action against the investigative judges or request their disqualification or withdrawal from the case.
Article 751 has been used to hinder investigations into the Beirut port explosion and against local banks for financial crimes and fraud allegations.
"If this is to happen, it would be very dangerous as it would obstruct the legal process and accountability," Saghieh said, adding that Salameh used Article 751 to stop previous legal cases against him.
Lebanon's bank depositors, who woke up one day in October 2019 to the harsh reality of having lost all their savings, are anxiously watching the unfold of Salameh's saga.
According to a policy paper published by Lebanese economic expert Toufic Gaspard in 2022, total bank deposits were the equivalent of $169 billion just a month before the October 2019 financial crisis.
"The banking collapse thus practically wiped out the wealth accumulated in banks by, and for, three generations: the fathers, the sons, and the new rising generation," Gaspard said.
Richard Pharaon, president of the Association of French Depositors in Lebanon, argued that Lebanon's judiciary failed to act at the onset of the financial crisis, prevent the transfer of funds abroad by the influential people and rule over depositors' cases against local banks.
"We discovered that it was part of a complete system made up of all the politicians, the parliament, the council of ministers, the central bank and the bankers," Pharaon said, describing it as the "robbery of the century."
Salameh's arrest prompted the depositors to mobilize again to fight for their life savings, by calling for protests and urging the investigative judge "to go to the end and disclose how the $130 billion were dissipated," according to the French depositors' association president.
The release of Salameh would be the "coup de grace" [a death blow] to the judicial system, Pharaon noted, adding that Western powers, especially in Europe and the United States, have "their eyes wide open and closely watching the Lebanese judges' performance."
Only pressure exerted by outside powers, aware of the transfers made by the corrupt elite in Lebanon to overseas bank accounts, could help recover depositors' money.
Yet, much more is needed to bring back Lebanon to a normal course, starting with genuine reforms.
According to Salamey, the problem lies with Lebanon's entrenched political and sectarian system, whose "resilience prevents true reforms from being achieved, making it difficult to restore justice comprehensively."
He argued that fundamental structural changes are necessary, including guarantees of judicial independence.
"Only with such reforms can the judiciary carry out transparent and conclusive decisions that would meet the aspirations of justice and the rights of the Lebanese people, especially depositors whose lives have been upended by the financial collapse," he said.