A Lebanese brokerage firm, Optimum Invest SAL, has come under scrutiny for alleged irregularities, conflicts of interest, and questionable transactions, according to two audit reports. This follows revelations about Forry Associates, a brokerage firm owned by the brother of former central bank governor Riad Salameh, suspected of siphoning off over $330 million from the bank.
The audits reveal several key points:
- Irregular Transactions: Optimum engaged in transactions labeled as “highly irregular” with the central bank, seemingly continuing a scheme similar to Forry’s, resulting in an additional $111 million in “illegitimate commissions.”
- Manipulation of Financial Statements: Optimum is accused of helping manipulate the financial statements of Lebanese commercial banks to conceal their losses while generating substantial fees for itself.
- Overcharging Clients: Optimum allegedly overcharged its clients, primarily Lebanese banks, without specifying where the additional funds from inflated financial instruments went. Auditors also found “conflicts of interest” involving Optimum’s management.
Despite these allegations, Optimum did not respond to inquiries regarding the findings. Lebanese authorities are actively looking into the case to open legal proceedings against the brokerage firm.
For years, Lebanon’s banking sector appeared robust, but the economic crisis that began in late 2019 exposed significant financial losses, a collapsed local currency, and largely insolvent banks. Increasing pressure for scrutiny is gradually unveiling the details behind what the World Bank has termed one of the worst financial crises in over a century.
2015 Audit Revealed Extravagant Misconduct:
Optimum’s 2015 audit, conducted by the Capital Markets Authority’s (CMA) financial control unit, unveiled “extravagant” misconduct, including irregularities in swaps where Optimum acted as an intermediary between banks. These transactions allegedly helped Lebanese banks report trades at higher prices than their actual market value, generating generous fees for Optimum. Conflicts of interest within the firm’s management were also uncovered.
Despite the auditors’ recommendations for refunds to clients and possible sanctions, no actions have been taken against Optimum.
Central Bank’s Role and Continuing Investigation:
The CMA audit focused solely on Optimum’s transactions with Lebanese banks, excluding the central bank, which was the firm’s largest client. The reason behind this omission remains unclear, but it coincided with Riad Salameh’s tenure as the head of Lebanon’s financial watchdog.
International auditors conducting a forensic audit of the central bank’s activities from 2015 to early 2020 found irregularities, such as the bank selling financial instruments to Optimum only to repurchase them at higher prices immediately. The additional premium was directed to a commission account, raising suspicions of a continuation of the commission scheme.
The ultimate beneficiaries of these commissions remain unknown due to the lack of comprehensive data provided by the central bank.
Despite these revelations, Optimum continues to operate and was acquired by LIBANK SAL in June 2020. The firm claims a commitment to high ethical standards and compliance with laws and regulations.
In conclusion, the Lebanese financial sector’s irregularities are gradually coming to light, shedding further light on the extensive issues contributing to the country’s severe economic crisis. Legal actions and investigations are ongoing, but questions persist about the extent of accountability in the system.
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