Disgraced Lebanese Central Banker Who Was a Fugitive Now Awaits His Fate
Riad Salameh was arrested on graft charges and accused of undermining Lebanon’s economy, as the Israel-Hezbollah war further destabilizes the country
BEIRUT—Known for his love of Cuban cigars and luxury Paris abodes, Riad Salameh has long been a part of this country’s loathed elite. But for a time, the public loved the central bank governor for steering Lebanon into the global middle class after its civil war ended, and then shielding it from the 2008 financial crisis.
Now, Salameh is one of the most hated men in Lebanon.
The former Merrill Lynch banker is blamed for the epic economic meltdown that destabilized Lebanon, weakened its institutions and created a political vacuum that helped empower Hezbollah. Israel’s offensive against the militant group has killed more than 2,700 people in Lebanon, most of them since September, and forced hundreds of thousands from their homes. Israel has launched thousands of airstrikes in Lebanon to roll back Hezbollah after it began launching rockets into Israel last year.
After spending a year as a fugitive in a chalet overlooking the Mediterranean, Salameh now sits in a Lebanese jail cell, awaiting trial on embezzlement charges that he denies, including a new one leveled against him on Oct. 31.
France demands his extradition to face money laundering and tax fraud charges, and Interpol issued a Red Notice in response. The U.S. sanctioned him for allegedly siphoning off funds from Lebanon’s central bank—and using them to buy luxury apartments in European cities including Paris for his son and former mistress.
Even before the current war, Lebanon’s economic crisis had pushed half the country into poverty. The national currency is worth less than 2% of its value against the dollar in 2019. The Lebanese have virtually no state-supplied electricity.
How Salameh’s case in Lebanon plays out could have far-reaching implications. An indictment could signal that Lebanon is serious about confronting corruption in the country’s political system, a fractious power-sharing of three main sects, Shiite Muslims, Sunni Muslims and Christians. That could ease the path to an international bailout and aid in postwar reconstruction. A full accounting of Salameh’s alleged crimes also would shine a spotlight on decades of broader government corruption that bankrupted the country.
But because Lebanon’s political factions exert influence over the judicial system, few expect the case against Salameh to expand beyond the current, relatively small case. The case also risks inflaming tensions between those factions. Investigators say they still haven’t had access to central bank balance sheets that would tell the full story of the country’s financial ruin.
“He knows where the bodies are buried,” said David Schenker, a former U.S. Assistant Secretary of State for Near Eastern Affairs. “The powers that be, the political elites, would rather just put this guy on ice, isolate him, remove any possibility that he might turn state’s evidence and implicate countless members of the Lebanese elite.”
After Salameh retired last year following three decades as governor of Lebanon’s Banque du Liban, he settled into a luxurious life as a fugitive, free to ignore France’s arrest warrant due to Lebanon’s reluctance to extradite its citizens. Salameh, a Maronite Christian and dual Lebanese-French citizen, relaxed in a pair of chalets in the beachside towns north of Beirut, smoked Cohiba cigars and dined in a marble-floored creperie next to stone cliffs on the Mediterranean.
It all abruptly ended on Sept. 3, when Salameh showed up for questioning at the Ministry of Justice in Beirut. During the interrogation, a prosecutor told security officers to handcuff him and lead him upstairs to the prosecutor general’s office, where officials detained him on charges of embezzling funds from the central bank, according to witnesses. In October, a judge denied his request to be released from pretrial detention.
Lebanese prosecutors charged Salameh with illegally taking $40 million from the bank. In separate cases, European prosecutors and the U.S. government accuse him of stealing $330 million.
Far more serious was the Lebanese banking crisis in 2019, which sparked an economic contraction that the World Bank said was one of the three worst of the past 150 years, comparable to Spain’s during its 1930s civil war. Economists and foreign leaders, including French President Emmanuel Macron, have said Salameh effectively turned Lebanon’s financial system into a Ponzi scheme, an accusation he denies.
Salameh, 74 years old, has denied the corruption charges against him, saying he amassed personal wealth in the private sector before taking the Banque du Liban governorship in 1993. Among his roles, Salameh was a portfolio manager for Lebanon’s wealthy former Prime Minister Rafiq Hariri, who was assassinated in 2005.
Salameh’s lawyer didn’t respond to a request for comment on the charges and his detention. “I believe what I’m trying to do and achieve is within the laws of the country, so I’m not breaking laws, and to the good of this country, my country,” he told CNBC International in 2020.
For years after the civil war, Lebanon appeared to defy financial gravity. The Lebanese middle classes bought cars, vacationed in Europe and partied at Beirut’s joyous nightclubs. The country became a haven for artists, intellectuals and financiers, and a playground for wealthy visitors from around the world.
The financial crisis in 2019—exacerbated by the massive Beirut port explosion in 2020—revealed an economy built on an illusion.
Under Salameh’s leadership, the central bank borrowed heavily and offered high borrowing rates for dollar deposits. Lebanon hurtled toward a dollar shortage after a drop-off in remittances from the country’s millions of expats following the Arab Spring, when revolution and war shook the Middle East.
The bank also pegged the value of the Lebanese pound to the dollar, allowing people to easily convert, but it lacked the dollars to cover all the accounts. Economists described this arrangement as a pyramid scheme. The bank called the borrowing-rate arrangement “financial engineering,” an attempt to build up reserves of foreign currency.
The 2019 crisis triggered a bank run followed by protests demanding an overhaul of the political system. Lebanon’s political elites, including Hezbollah, refused.
In less than a year, millions of people fell into poverty. Some robbed banks at gunpoint to retrieve their own savings. With their wages almost worthless, Lebanese soldiers began to desert. Hundreds scrambled onto boats attempting to reach Cyprus.
Many Lebanese remain bitter that they can’t retrieve their savings that are still locked in the country’s banking system, which is still largely unreformed. For those people, Salameh is enemy number one.
“He is the accountant of the mafia,” said Ibrahim Abdallah, 44, who said he had some $3 million saved from his work in Dubai as a real-estate developer when the crisis hit and is now an activist for depositors’ rights.
Salameh leveraged his position at the central bank to enrich himself, Lebanese prosecutors and other Western officials allege. In one alleged scheme, he funneled $330 million to a shell company owned by his brother in the British Virgin Islands through an arrangement that gave the company a commission on years of central bank transactions, according to the U.S. Treasury Department.
While Lebanon sped toward financial ruin, Salameh used the funds he accumulated to buy high-end real estate in France, Germany, Luxembourg, London and elsewhere, U.S. officials say. The properties allegedly include an apartment in an elite Paris neighborhood registered in the name of his former Ukrainian mistress, Anna Kosakova, and an office building on the Champs-Elysées.
The globe-spanning corruption case around Salameh reached a crescendo in June 2021. As Lebanon was deep in economic crisis, Salameh flew on a private jet into Paris’s Le Bourget airport, where customs officials searching his luggage found $7,710 and more than €84,430—much of it in 500-euro banknotes. He had declared he was carrying only €15,000, according to a French police document seen by The Wall Street Journal.
During questioning, Salameh said he had forgotten the money was in his suitcase.
“Where does the money you are carrying come from and can you provide us with proof?” his interrogator asked him.
“It is my personal money. I do not have proof on me, but I can get some,” he responded, according to the police document.
Salameh’s September arrest wasn’t based on his alleged role in Lebanon’s financial crisis nor on the other accusations.
Lebanese prosecutors instead are holding him in connection with a separate alleged embezzlement scheme in which the Banque du Liban bought and sold treasury bonds with a London-based company called Optimum Invest, founded by a distant relative named Antoine Salameh.
In the alleged scheme, the Banque du Liban would lend money to Optimum, which would buy treasury bonds from the bank, and then sell them back at an inflated price, according to an audit report by the risk consulting firm Kroll seen by The Wall Street Journal that was provided to Lebanese prosecutors.
“It’s a microcosm of everything that was wrong with the central bank in terms of fraudulent accounting, commissions paid to insiders to personally enrich themselves, a lack of transparency, all that wrapped into one neat transaction,” said Mike Azar, an international financial analyst closely following the Salameh case.