---
title: "Shedding Light on the Alvarez & Marsal Report | Ghazi Mahmoud"
url: https://ghazimahmoud.com/en/articles/2023-08-24-7bb9ca/
lang: en
description: "While the preliminary forensic audit report into the accounts of Banque du Liban, conducted by the firm Alvarez & Marsal, did not yield new findings regarding the violations of Banque du Liban Governor Riad Salameh during the period under audit, that audit was confined to one-fifth of the duration of his tenure in the governorship."
---

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# Shedding Light on the Alvarez & Marsal Report

[Brig. Gen. (Ret.) Dr. Ghazi Mahmoud](https://ghazimahmoud.com/en/about/)

24 Aug 2023 · 8 min read

[Banking and money](https://ghazimahmoud.com/en/articles/money/)

While the preliminary forensic audit report into the accounts of Banque du Liban, conducted by the firm Alvarez & Marsal, did not yield new findings regarding the violations of Banque du Liban Governor Riad Salameh during the period under audit, that audit was confined to one-fifth of the duration of his tenure in the governorship. Meanwhile, readings of the report varied and interpretations differed according to the aims of those advancing them, for the most part bearing out the famous dictum of the late former MP and minister Elias Saba, an expert on Lebanese figures, that "numbers in Lebanon are a point of view." Although the report contains numerical data that are difficult to bend to interpretation, this did not stop some from approaching those figures on the basis of their own interests, without observing the minimum standard of objectivity that must be upheld when analyzing and critiquing a report of this kind. That is especially true given the report's high degree of sensitivity, stemming from its examination of one of the most vital public institutions, namely Banque du Liban, and its particular importance in diagnosing the causes of the crisis so that appropriate solutions may be formulated in light of it. Before analyzing the report and shedding light on parts of its contents, one must pause at the implications of the list of financial transfers to prominent figures and institutions, which, if anything, demonstrate how the governor monopolized decisions on buying and selling, giving gifts, striking deals, and distributing donations, as though Banque du Liban had passed to him by inheritance. It should be noted that such conduct applies to most heads of public administrations and institutions, who monopolize decision-making and dispose of the resources of their administrations and institutions according to their own interests and whims, heedless of the laws and regulations in force, to the point where such behavior has become a primary cause of the faltering of the public sector and its institutions. As for the report itself, it consists of 331 pages divided into twelve chapters, in addition to the introduction and the executive summary, while the audit is limited to the period extending from 2015 to the end of 2020, and concluded by exposing fundamental flaws in Banque du Liban's operating mechanism and its mismanagement over six years. Yet it came as a disappointment to Lebanese citizens suffering under the weight of an unprecedented economic crisis, insofar as it documented information already known to most observers without uncovering the fate of the deposits that were squandered and stolen during that period. Conversely, despite the foregoing, and despite the brevity of the timeframe covered by the audit, the report's significance lies in addressing a watershed period that witnessed pivotal monetary and financial events, beginning with the accumulation of losses in Banque du Liban's capital account, which turned it from a profit-making account into one recording a deficit. The same period saw the execution of financial engineering operations with commercial banks, in addition to the default on Eurobonds in March 2020, culminating in the collapse of the national currency, which constituted one of the starkest manifestations of the crisis. Indeed, during the period extending from 2015 to 2020, Banque du Liban's foreign currency assets declined, shifting the bank's position from a foreign currency surplus of 10.7 trillion Lebanese pounds (7.2 billion US dollars) to a deficit in those currencies of 76.4 trillion Lebanese pounds (50.7 billion US dollars). Uncovering this fact, namely Banque du Liban's squandering of 87.1 trillion Lebanese pounds (57.9 billion US dollars), is virtually the most important achievement of this report. The report also reveals the exorbitant cost incurred by Banque du Liban as a result of the financial engineering operations, which reached 115 trillion Lebanese pounds (76.3 billion US dollars), even as the governor of Banque du Liban took pains to conceal it through "accounting engineering" deployed for purposes other than those for which it was intended. Banque du Liban used unconventional accounting standards to prepare its financial statements with the aim of showing purported operating profits, yet did so without adhering to the transparency standards that lend credibility to such statements. However important the report's disclosure of the outcomes of the financial engineering operations and their high cost may be, what is needed is for a forensic audit to identify the parties that benefited from them. That calls for a forensic audit of the banks' accounts to reveal how the profits they realized from participating in the financial engineering operations conducted by Banque du Liban were distributed, extending to identifying the beneficiaries of the high interest rates and the sums they collected, as well as determining the scale of the commissions and bonuses obtained by the bank managers who marketed those operations. Among the accounting practices uncovered by the report and adopted by Banque du Liban to conceal the reality of its financial position was its practice of deferring the recording of high interest costs so as to artificially inflate profitability in the financial statements. The same was true of its creation of accounts to book seigniorage profits in order to cover losses and boost profitability. The very same applies to its failure to account for the decline in the value of government debt securities, which led to the inflation of their value, in addition to recording unrealized gains or losses in the gold account on the balance sheet, which inflated or understated the value of the bank's assets and capital. Thus, the Alvarez & Marsal report has laid bare the true financial position of Banque du Liban after years of systematic concealment of the reality of that position and other data from public opinion, indeed of misleading reporting in statements and alterations to budgets. These findings emerged despite the obstacles and impediments placed by Banque du Liban in the path of the investigators and the auditing firm, and its refusal to provide the cooperation required to complete the audit properly. The bank supplied the firm with unformatted data restricted to text without tables, even though they consisted of numerical figures, necessitating the creation of a new database for them. Banque du Liban also invoked the Banking Secrecy Law to justify redacting financial transfer (SWIFT) data before handing them over to the auditing firm, limiting the investigation's ability to identify the ultimate beneficiary of those transfers. This was despite the enactment of Law No. 200 dated December 29, 2020, which suspended the provisions of the Banking Secrecy Law for one year to facilitate the audit's access to the information and data needed to reach the appropriate conclusions. The report considered that the authority concentrated in the hands of the governor of Banque du Liban and exercised by him is largely unchecked and surpasses that enjoyed by other central bank governors around the world, while oversight is inadequate and scrutiny and accountability are off-limits where he is concerned. That explains the general absence of good governance and the insufficiency of risk management procedures at Banque du Liban, requiring improved oversight to curb potential future financial risks that could be caused by the conduct of those in charge of the central bank. Despite the gravity of the violations uncovered by the report and committed by the former governor of Banque du Liban, and despite the enormity of the losses it detailed, caused by his policies that squandered foreign currency reserves and by the financial engineering operations during the period under audit, the report's disclosure of the transfer of "illegal commissions" amounting to 111 million dollars to six Lebanese banks and a bank in Switzerland (HSBC Private Bank), in addition to transfers totaling 98.8 million US dollars during the audit period to Riad Salameh's account at various foreign banks, constitutes proof of his encroachment on public funds and an indictment of the policies he pursued, at least during the final period of his tenure. Conversely, in light of the findings produced by the Alvarez & Marsal report, questions inevitably arise over why successive governments turned a blind eye to Banque du Liban's failure to publish detailed statements of financial position, known as the balance sheet, the profit and loss account (P&L), cash flow statements, and changes in equity on a regular basis and as required by the Code of Money and Credit. Under the Code of Money and Credit, such data are also supposed to be obtained by members of the Central Council, and in particular by the Government Commissioner to Banque du Liban, so that they can perform their supervisory role by assessing the outcomes of past decisions and measures and approving their continuation, amendment, or development. The importance of the report, despite the incompleteness of its data owing to the obstacles raised before the auditing firm, lies in its having lifted the veil on the tip of the iceberg behind which the former governor of Banque du Liban had long taken cover, and shed light on the riddles behind which he hid. Even so, the report remains far from being a forensic report, because it did not trace the losses caused by the financial engineering operations or identify their beneficiaries, nor those squandered by Banque du Liban from its foreign currency assets during the audit period. Responsibility requires setting aside factional and personal considerations when analyzing the report, and looking toward how to protect Lebanon and the Lebanese from once again falling victim to unbalanced policies, something that will not be achieved unless everyone who assumes public office is subjected to scrutiny and accountability, especially those among them who fancy themselves demigods even as the facts consign them to the dustbin of history. Protecting Lebanon and the Lebanese begins with a return to respecting the provisions of the Constitution and abiding by its terms, particularly with regard to electing a President of the Republic, and with officials complying with the requirements of the law and public order. That is all the more urgent given that the continued vacancy in the presidency of the Republic, alongside a caretaker government lacking full powers, heightens the fragility of the state and its institutions, which day after day are being emptied of their leaders and directors-general much as happened with the governorship of Banque du Liban, accelerating the erosion of state authority and threatening national stability and the future of the country and its people.

Translated from Arabic with AI. [Read it in Arabic](https://ghazimahmoud.com/articles/2023-08-24-7bb9ca/)

## Published in

- [Channel 23](https://ch23.com/Article/95354/إضاءة-على-تقرير-الفاريز-ومارسال)
- [Lebanon Files](https://archive.lebanonfiles.com/2023/articles/باقلامهم/إضاءة-على-تقرير-الفاريز-ومارسال/)
- [OZ Arab Media](https://ozarab.media/إضاءة-على-تقرير-الفاريز-ومارسال/)

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[27 Jun 2023 · Banque du Liban's Measures and Circulars and the Lost Confidence · LinkedIn, Lebanon Files ](https://ghazimahmoud.com/en/articles/2023-06-27-4e413a/)