Beirut is abuzz with talk about Salah Ezzedine, a financier who bilked thousands of Lebanese out of their life savings before declaring bankruptcy late last month.
Dubbed the “Lebanese Bernie Madoff”, Mr Ezzedine took a financial beating when the collapse of oil prices last year decimated his holdings in Eastern Europe.
In a desperate attempt to recover from his losses, Mr Ezzedine raised hundreds of millions of dollars from Lebanon’s insular Shiite community by offering a reported 40 per cent annual return. In the blink of an eye, the money was gone.
What makes the case unique is Mr Ezzedine’s connections to the Shiite Hizbollah movement. Mr Ezzedine owns a publishing house known for producing pro-Hizbollah and anti-Zionist propaganda, as well as a children’s TV channel — both named after the late son of Hizbollah Secretary-General Hassan Nasrallah.
Although published details of the scandal vary, at least four senior Hizbollah figures have been named as having invested substantial sums with Mr Ezzedine. The Kuwaiti paper Al-Watan put the movement’s total net losses at $683 million.
Either way, the most significant damage may be to the reputation of Hizbollah, which has cultivated a public image of incorruptibility in contrast to the legendary excesses of Lebanon’s traditional power elite. The movement’s close ties to Mr Ezzedine were seen by many Shiites as a de facto endorsement of his integrity as an investor. Without it, he would not have been able to dupe so many people into parting with their hard earned money.
Hizbollah’s financial health depends on bestowing this kind of status on members of the local and diasporic Shiite business community, who in turn provide “charitable” donations to its operations. In effect, Hizbollah leverages its stratospheric stature in the Shiite world to extract money from the well-to-do, who would otherwise find it difficult to do business without its blessing. But this quid pro quo only works if Hizbollah’s blessing means something — and it will mean a great deal less in the wake of the Ezzedine scandal.
Even more damaging is the fact that Mr Ezzedine took from the poor to pay off well-connected investors. Hizbollah has engaged in many illicit activities abroad for the purpose of raising money, often to the detriment of host societies (eg the blood diamond trade in West Africa), but it has not been known for corruption that bleeds the Shiite community. Until now, that is.