Lebanon’s Offshore Governor
13 Aug 2020

By Hazem Ameen and Alia Ibrahim (Daraj.com) and Tom Stocks, Riad Kobaissi, and Rana Sabbagh (OCCRP), 11 August 2020

OCCRP – Offshore companies owned by the governor of the Central Bank of Lebanon have quietly invested in overseas assets worth nearly US$100 million in recent years, even as he has encouraged others to invest in his economically devastated country.

Rumors of Central Bank Governor Riad Salame’s offshore wealth have swirled around Beirut for years, but the extent of the investments by one of Lebanon’s most prominent public officials has remained secret — until now.

OCCRP and its Lebanese partner, Daraj.com, tracked Salame’s vast overseas investments, finding multiple real estate deals in the United Kingdom, Germany, and Belgium made over the course of a decade. Company accounts suggest the investments were often financed by borrowing, with tens of millions of euros in credit sometimes secured without collateral.

Much of his money went to the U.K., a favorite destination for overseas investors looking for a discreet place to make their money grow. Foreign corporations with undisclosed ownership now hold property valued at more than 84 billion pounds ($104 billion) in England and Wales, which has prompted calls for greater transparency in the U.K.

When contacted by OCCRP, Salame said he has broken no laws — that he amassed “significant private wealth” before he joined the central bank in 1993, and that “nothing prevents me from investing it.”

It’s unclear if the offshoring violates any Lebanese laws, but revelations about Salame’s investments come amid a financial crisis that many in Beirut blame on his management of the Banque du Liban (BdL). In a recent Financial Times analysis of leaked audit reports, the governor was accused of using dubious accounting measures to artificially boost the institution’s assets by at least $6 billion. Salame attributes any criticism to politics and a “systematic campaign” against him.

A group of Lebanese lawyers in July formally accused Salame of various violations of Lebanon’s penal code, including embezzlement of BdL assets and mismanagement of public funds. A judge has set an October hearing date. Salame’s assets, including properties and several vehicles, have been ordered frozen.

In an email to OCCRP, Salame described the lawsuit and decision as “groundless.”

Governor Under Fire

In Hamra, a bustling central business district near the American University of Beirut, newly installed heavy concrete blocks mounted with barbed wire signal a new normal. The wall around the Banque du Liban building protects a financial institution — and a man — now under public attack.

For nearly three decades, Salame was seen as a financial genius and undisputed guarantor of a robust Lebanese economy, a national hero often discussed as a candidate for the presidency.

That image has been tarnished in recent months.

“Riad Salame is a thief” and “down with the governor” are common themes among the countless slogans and caricatures sprayed on walls and windows across Beirut.

Raoul Nehme, Lebanon’s economy minister until this week, described Lebanon in July as a “failed state,” in reference to the ongoing economic crisis.

Anger boiled over into violent street scenes in central Beirut following last week’s devastating explosion of abandoned ammonium nitrate stored at the port. Protesters stormed government buildings and erected gallows to hang effigies of the president, the parliamentary speaker, and the leader of the Hezbollah military group and political party.

On Monday, Prime Minister Hassan Diab and his entire cabinet resigned. Salame, who is not a cabinet minister, remains in office.

But the port disaster is seen by many as only the latest outrage suffered by a country already grappling with an array of crises and an economic collapse blamed on endemic corruption and the negligence of ruling politicians.

In November, the World Bank warned that half the Lebanese population could fall into poverty. The crisis has triggered economic disarray, a first-ever sovereign debt default, yawning unemployment, and soaring food prices. The Lebanese pound has lost 70 percent of its value against the dollar since October. Street demonstrations have raged for months. Protesters hurl Molotov cocktails at banks and ATMs. Security forces respond with rubber bullets.

Among the complaints: Salame for years has backed bank loan policies that drove excessive government borrowing, leaving Lebanon unable to make crushing debt payments. When the economy collapsed in 2019, the country’s elites transferred their fortunes to offshore accounts as restrictions on transfers and withdrawals left ordinary people cut off from savings and struggling to survive. Alain Bifani, who resigned as director general of public finance in June, says that up to $6 billion has been “smuggled” out of Lebanon since the crisis began.

Lebanese prosecutors in January asked a central bank investigation commission to determine how much money had been sent to Switzerland since last October, and to determine whether the source of the funds was suspicious.

Salame launched an investigation but said nothing publicly about his own substantial wealth, safely invested in Europe well before the current crisis and the period covered by the probe.

Family Affairs

Just six days after the central bank’s investigation was announced, a Luxembourg company beneficially owned by Salame pocketed 11 million pounds ($14.3 million) through the sale of a core U.K. asset acquired in 2013.

The deal went unnoticed in Lebanon. Riad Salame’s name appeared nowhere in the land records.

For years, the central banker has been able to shield investments like this from public scrutiny, often by placing them in the names of close family members who manage companies on his behalf.

Other Salame investments are handled through companies incorporated in offshore jurisdictions that require little or no public disclosure of beneficial ownership.

One property reviewed by OCCRP involved both family and concealed beneficial ownership: A 3.5 million pound ($4.1 million) apartment in Broadwalk House, which overlooks Hyde Park near the Royal Albert Hall in one of London’s most enviable postcodes.

The spacious apartment made an impressive home for Nady Salame, the son of the bank governor, but the 26-year-old was not the legal owner of the apartment that he listed as his address in official documents in 2013.

The property was owned by Merrion Capital S.A., an obscure company registered in Panama that bought the luxury apartment early in 2010. This company’s real owners were hidden behind Panamanian subscribers — stand-ins who executed the articles of incorporation of thousands of companies on behalf of clients — and the founder of a Liechtenstein trust company, who was listed as Merrion Capital’s director and president.

Nady Salame became a director of Broadwalk House Residents Ltd, the building’s management company, in 2014. He wasn’t the legal owner of the flat until January 2017, when the unmortgaged property was transferred into his name exactly a month after his 30th birthday.

Title transfer documents filed with the U.K.’s Land Registry show that Merrion Capital transferred the property on January 3, 2017, to Riad Salame, who signed a statement saying the transfer was “not for money or anything that has a monetary value.” Given that no money changed hands, the statement suggests that Merrion Capital was connected to Salame.

The following day Riad Salame transferred the property to his son. Merrion Capital was dissolved two months later.

OCCRP asked Riad Salame if he was the beneficial owner of Merrion Capital. He did not answer.

The property at Broadwalk House was not the only example of a mingling of assets between Salame and his son.

Beginning in 2011, Nady Salame was appointed as a director of several European investment companies. He approved a slew of property investments across Europe, including a prime office building in London’s legal district.

The real beneficiary of these deals was his father, Riad Salame, who invested tens of millions of euros in real estate opportunities in three European countries under his son’s signature.

Riad Salame’s ultimate interest in the deals is now public because Luxembourg in 2019 changed its previously opaque corporate registry law to comply with EU standards for disclosure of beneficial owners.

According to the Luxembourg registry, Riad Salame owns or controls three companies: BR 209 Invest S.A., Fulwood Invest S.a.r.l., and Stockwell Investissement S.A. Since 2011, his son has been a director of two of these Luxembourg companies, as well as five subsidiaries of BR 209 Invest in Luxembourg, Germany, and Belgium.

Nady Salame has experience in managing the wealth of high-net-worth individuals. Three years before he started handling deals for his father, he took a job with Crossbridge Capital, a London-based company started in 2008 by former members of Credit Suisse’s U.K. wealth management unit.

Crossbridge Capital had strong ties to Lebanon’s banking and business elite. Its founding shareholders included Nabil Aoun, former president of the Lebanese Broker Association. Rami El Nimer, chairman and general manager of Lebanon’s First National Bank (FNB), and Roland El Hraoui, another FNB shareholder, later invested in the firm. Banque Audi Suisse S.A., a Swiss subsidiary of Lebanon’s Bank Audi, invested in about 2016 and Philippe Sednaoui, the Swiss subsidiary’s CEO, became a director.

Nady Salame, then 21 and fresh from internships at Merrill Lynch, Credit Suisse, and Julius Baer, was among Crossbridge Capital’s early employees. Within three years he was credited with attracting 100 million pounds ($158 million) in assets to the firm’s $2 billion portfolio, according to a 2011 wealth management industry publication. The origin of these reported funds is not known.

Nady Salame was awarded a minority share in the company’s Maltese parent company, Crossbridge Capital (Holding) Co Ltd. He remains a shareholder, though he left the firm in 2015. Nady Salame declined to comment when contacted by OCCRP. Crossbridge Capital said in an email that “at no time was Mr. Riad Salame directly or indirectly responsible for any client assets.”

‘A Penchant For Secrecy’

While something of an international banking superstar, Riad Salame has been criticized for his management style. U.S. diplomatic cables made public by Wikileaks reveal deep concerns over the possibility that Salame might be elected president of Lebanon.

In a March 2007 cable, former U.S. Ambassador to Lebanon Jeffrey Feltman was critical of Salame’s “penchant for secrecy and extralegal autonomy at the Central Bank, past closeness with Syrian leaders, unwillingness to disclose the amount of Lebanon’s net foreign exchange reserves, and resistance to the oversight of an IMF program.”

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