More than a banking scandal?

By Bachir El Nakib (CAMS), Senior Consultant, Compliance Alert (LLC).

 

 

The end of 1982 was marked by the dawn of a new commercial bank to be named Bank Al-Madina S.A.L., consequently listed in the Lebanese Banks list under no. 105 as of 31/12/1982.

Banking operations began in the bank's Head Quarters in Hamra with an invested capital of 50,000,000 Lebanese Pounds paid in full. On February 18, 1983, and upon the request of Bank Al-Madina, 'Banque du Liban' approved a request for an increase in capital by 10,000,000 Lebanese Pounds, which meant that the Bank's letterhead now read "Capital 60,000,000 L.L., Paid in Full". This multi-faceted growth was further implemented when the Bank received a green light from 'Banque du Liban' to open its second branch, which meant the establishment of what later became to be known as "Jdeideh Branch".

There was no change in the status of Bank al-Madina S.A.L., until 1986, when a shift in the Bank's identity took place after the acquisition of a majority share by the Abu-Ayyash family.1988 saw the opening of Bir El-Abed Branch followed one year later by a further expansion into Baakline and Tarik El-Jadidah, bringing the total number of branches to five. In the period up to 1995, only one addition to the number of branches took place - Saida Branch.

The next phase of change came in mid-1995 when 'Banque du Liban' approved an increase in the Bank Al-Madina S.A.L.'s capital from 60 million L.L. to 16.5 billion L.L., followed up with a second increase in capital to 45.45 billion L.L. in 1998.Fierce competition and noticeable expansion of the banking sector compelled the inevitable need for Bank Al-Madina S.A.L.'s further growth, and so, on October 29, 1998 nine branches of the 'Foreign Trade Bank were bought, followed by the acquisition of six additional branches of 'Prosperity Bank

BOARD OF DIRECTORS & MANAGEMENT

BOARD OF DIRECTORS


  Dr. Adnan Abu Ayyash
   Honorary Chairman - General Manager

  Sh. Ibrahim Abu Ayyash
   Chairman - General Manager

  Mr. Michel El-Helou
   Member

SENIOR MANAGEMENT


  Mr. Wissam Abu Ayyash
   
Manager


  Mr. Paul Choufani
   Deputy General Manager


  Mr. Elie Ghanem
   Assistant General Manager


  Mr. Rashid Najjar
   Advisor to Chairman - General Manager


  Mr. Walid Nassif
   Deputy General Manager

 


  Mr. Antoine Abdul Nour
   Advisor to General Manager

 

Lebanese bank scandal linked to Hariri killing

The Ayyash brothers claimed to have deposited around $450 million into the Al-Madina bank and its subsidiary United Credit Bank (UCB) to make up for the liquidity crisis

 

 

 

 

The Ayyash brothers claimed to have deposited around $450 million into the Al-Madina bank and its subsidiary United Credit Bank (UCB) to make up for the liquidity crisis. A subsequent announcement by the governor of the Lebanese Central Bank, Riad Salameh, that Adnan Ayyash was a "reliable" banker was backed by the Central Bank investigative report which revealed no evidence of illegal transactions. It released the assets of a dozen people, the Ayyash brothers, their aide Rana Qoleilat, her two siblings and seven of their associates, which it had frozen in February, 2003. 

But in April the brothers' con was uncovered when the Banking Control Commission (BCC) submitted a report to the Higher Banking Authority indicating that Al-Madina and UCB had fallen below their required reserve by more than $300 million. It also questioned the bank's claims of having deposits of $429 million dollars at Deutsche Bank and $12 million dollars at Credit Suisse. 

The BCC filed another report in July, accusing the bank's managers of embezzling millions of dollars, forging documents and writing more than $50 million in bad checks. The Central Bank immediately refroze the assets of the same 12 persons and transferred the file to the judiciary after Adnan Abu Ayyash wrote a bad check of several million dollars to his brother Ibrahim, who in turn gave it to a businessman, Izzat Qaddoura. 

The Central Bank appointed an administrator to run Al-Madina and to assess the value of its assets. 

State Prosecutor Adnan Addoum ordered the arrest of Ibrahim Abu Ayyash only to release him a week later after saying the judiciary was ending its investigation of the two banks after they had raised enough money to cover all deposits. 

The announcement also followed an out-of-court settlement with an Ali Ahmad, who had laid a complaint against the Ayyash brothers after receiving a bad check for $21.75 million. Several officials close to the slain Hariri condemned Addoum's decision to release Abu Ayyash, while allies of President Emile Lahoud refrained from commenting, leaving suspicions as to who benefited from the decision. 

Similarly most plaintiffs in suits against the bank dropped their charges after reaching out-of court settlements, making it clear that government policy, prior to the Syrian withdrawal from Lebanon at the end of April 2004, favored such settlements, according to the Middle East Intelligence Bulletin (MEIB). 

Addoum insisted at the time that the investigations did not reveal the involvement of any politician or official. 

The Ayyash brothers were later sentenced in absentia to three years in prison in a lawsuit filed against them by Ali Ahmad. And in November, Salameh also filed a general complaint against anyone proved by the investigation to be involved in fraud. 

The complaint came after Central Bank discovered two forged documents, allegedly issued by the Central Bank, that authorized the merge of Al-Madina and UCB and granted a loan of LL 250 billion ($166.7 million), according to the Lebanese weekly magazine Assayad. 

Simultaneously, Rana Qoleilat was also arrested several times after November 2003 and bailed every time after plaintiffs dropped their charges against her in favor of out-of-court settlements. 

Qoleilat is wanted today on charges preferred by the state even though individual plaintiffs dropped their cases against them. 

The last time she was released on bail was April of last year - one day before the Syrian troops withdrew from Lebanon - and with them Syria's local head of intelligence, Rustom Ghazaleh, who is said to have had a hand in her release. 

Three days later she fled the country to London on a forged passport. Assayad magazine revealed she is now in London after tracing a call she made to a Lebanese friend to inquire about a recipe for rice pudding. 

The latest developments in the case came earlier this month during a meeting between Justice Minister Charles Rizk and State Prosecutor Said Mirza. Rizk's information office said the case will be divided into four sections: 

The first includes depositors' money; the second comprises more than 100 criminal cases against the Ayyash brothers, Qoleilat and their associates; the third covers embezzlement, forgery, fraud and money laundering; the final part deals with the UN investigation into Hariri's murder and the bank's possible role in financing the assassination. 

Adnan Abu Ayyash accuses Ghazaleh and the Qoleilat siblings of spiriting away $72 million from the bank between 2000 and 2003. Ghazaleh is a prime suspect in Hariri's assassination. 

According to a report by Fortress Global Investigations, a New York-based firm hired by Adnan Abu Ayyash, "during a one-month period, ending in January 2003, Qoleilat used Al-Madina funds to pay $941,000 to Ghazaleh's brothers. ... The following March she arranged for a $300,000 'donation' to Ghazaleh from the bank's funds. 

"She also moved $100,000 from an account in UCB to a Lebanon bank account of former Syrian Defense Minister Mustapha Tlass." 

The report's authors, two former senior FBI agents, John Walzer and Thomas Vinton, also revealed that Qoleilat "transferred at no cost a lavish Beirut apartment to a close friend of Khaled Kaddour, identified as the office manager for Syrian Lieutenant Colonel Maher Assad, the brother of Syrian President Bashar Assad." 

It adds that Qoleilat used bank funds to buy a villa from Elias Murr, current Lebanese Defense Minister, for $10 million and placed it under the name of her boyfriend. When the property was later taken over by the Central Bank as part of Al-Madina's assets, it was valued at $2.5 million, said the two ex-FBI men. 

They added Qoleilat "claimed she was backed by high ranking government officials and Army intelligence officials" who were identified recently as "invisible beneficiaries." 

The Lebanese judiciary is now investigating the authenticity of this claim. According to the Lebanese daily An-Nahar, the beneficiaries are Lebanese and Syrian officials who received the money either in cash or through checks transferred from one person to another and one bank to the other until the officials or politicians could cash them in an account free of suspicions. 

The newspaper added that this was the case with a former minister, who is a current MP and a lawyer who was involved in reaching a settlement between Adnan Abu Ayyash and Central Bank when the liquidity crisis erupted in 2003. It said the lawyer received large amounts of cash and checks that were banked in Lebanon. 

While the Syrian officials, said An-Nahar, "received only cash and expensive gifts, mainly new cars, and sometimes even a fleet of dozens of cars delivered to Damascus in broad daylight." 

Ayyash filed a lawsuit against Qoleilat in New York, according to newspaper U.S. News & World Report, in which he accused her of laundering money for former Iraqi President Saddam Hussein's government through a secret Al-Madina account. He also charged her with giving $3.5 million to a political front for Hizbullah. 

Ayyash said he pumped $1.2 billion into the bank between 1998 and 2003. He later discovered Qoleilat duped him into believing she was crediting his funds to an account in his name although it did not exist, added U.S. News & World. 

Central Bank Governor "Salameh" transferred the Al-Madina Bank case to Mirza along with all the documents and the findings the governor has prepared including a list of politicians who benefited from the $1.2 billion stolen from the bank.
 

 

 

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