Lebanon hires US firm for central bank probe

BEIRUT: The Lebanese government has hired Alvarez & Marsal, a New York-based professional services firm, to carry out a forensic audit of central bank accounts since 2015 amid claims finances have been mismanaged in the corruption-plagued country.

Finance Minister Ghazi Wazni asked for a week to prepare documents to sign the contract for the audit, which could take between three and six months.

Lebanese President Michel Aoun has called for an audit since March, following the country’s first-ever default on a $1.2 billion eurobond payment. The process will attempt to identify the cause of the financial and monetary crisis and the level of foreign exchange reserves.

A Ministry of Finance source told Arab News that the finance minister “submitted a list of six companies so the Cabinet can choose one to conduct the forensic audit, after refusing to contract Kroll because of its alleged links with Israel, with whom Lebanon is at war.”

The source added: “The Cabinet voted for Alvarez & Marsal, although the cost of contracting the firm is higher than the cost of contracting Kroll. It will have a crew in Lebanon consisting of two directors and nine associates at a cost of $2.2 million, while Kroll’s financial offer amounted to only half a million.”

The Shiite political duo of Hezbollah and the Amal movement voted against “any company that will conduct the audit if it has Israeli links or has offices in Lebanon, for fear of sensitive information falling into the hands of hostile parties,” a meeting heard.

Questions have been raised about Alvarez & Marsal’s hiring ahead of Kroll if all six firms under consideration have links with Israel. The issue was put forward by Justice Minister Marie-Claude Najm during the Cabinet meeting. Prime Minister Hassan Diab said Alvarez & Marsal was the “most suitable,” without providing further details.

Alvarez & Marsal, founded in 1983, offers specialized advisory services to companies, investors and government agencies around the world.

Director-General of Administrative and Financial Affairs and tax expert Dr. Ahmed Al-Lakkis said: “If contracted, Alvarez & Marsal will audit the accounts of the central bank since 2015. But the Parliament’s finance and budget committee has asked in a 2017 report about the fate of cutting off calculations for the budgets since 1997. There has been $27 billion spent with no record and if the auditing company wants to go deeper into the matter, it can go back in its audit as far as 1997.”

When asked if the audit would face political and legal obstacles, Al-Lakkis said: “Of course, legal amendments are needed in Parliament, such as the Bank Secrecy Code and the Code of Money and Credit, which require the powers of the governor of the Bank of Lebanon and the Special Investigative Authority of the Bank of Lebanon.”

The possibility of the audit expanding to include all state institutions, administrations and ministries since the Taif Agreement was also voiced in Parliament.

However, Al-Lakkis said: “This can be achieved during the audit process because all payments made by state institutions go through the central bank so there is no need to audit all the institutions.”

Lebanon’s political class fears the forensic audit because it will implicate political parties who have shared power since 1997.

The Ministry of Finance source said: “The central bank’s governor, who is not currently present in Lebanon, can prevent the auditing company from accessing information at the central bank by invoking the Code of Money and Credit, and the Bank Secrecy Code. The amendment of these laws will require an unspecified time in Parliament.”