x Abu Dhabi, UAEWednesday 26 July 2017

Weaving the past into lessons for Lebanon's future

It's funny how separate events can become connected.

Event 1: on Tuesday, Bank Audi's Weekly Monitor reported "total bank activity grew by 4 per cent in the first quarter of this year. It moved from US$115.3 billion (Dh423.52bn) at the end of last year to $119.9bn at the end of March this year - a progression about three times higher than that of similar periods of the previous five years".

Good news for Lebanese banking, especially considering, for the past two decades, it is the sector that has single-handedly kept the country afloat. Event 2: I discovered my first boss Naim Attallah, the evergreen Palestinian-born film and television producer, publisher, author and journalist, who turned 79 this month, now posts on Twitter. Event 3: I stumbled across a photograph of my parents with Yusuf Beidas.

Yusuf who? Lebanese of a certain age will remember Mr Beidas as the brilliant but ultimately doomed Palestinian banker who, in the early 1960s, made Lebanon's Intra Bank the biggest financial institution in the Middle East. When Intra collapsed spectacularly in 1966, it was not just a story for the business pages. The bank's downfall was the moment politics and finance collided, as the Lebanese establishment lost patience with what it saw as an upstart Palestinian who had much of the country in his pocket.

It was hardly our finest hour. In fact, Najib Alamuddin, the late MEA (Middle East Airlines) chairman and government minister, went one step further. In his autobiography The Flying Sheikh he called the Intra affair "the beginning of the disintegration of Lebanon … [by] a system so corrupt in style and morals that had plagued Lebanon since independence and finally plunged the nation into civil war".

Intra Bank was founded in 1951. By 1966, it was a Middle East powerhouse with offices in the US, the major European capitals, Brazil, the Bahamas and west Africa. Its assets included property in New York, where it owned a 27-storey office building on 5th Avenue, and Paris. It owned a major French shipyard and MEA, Lebanon's national carrier. The fall, when it came, was swift and brutal. In early October 1966, news leaked out that Intra was in difficulty.

There was a run on the bank but the central bank, which should have intervened, sat by and did nothing. Even when it bailed other Lebanese banks affected by the crisis, it refused to throw a lifeline to Intra. The events of October 13 and 14 triggered shock waves that no Lebanese bank today could create. They also destroyed Mr Beidas, who died a broken man in Lucerne, Switzerland, two years later.

Enter Naim Attallah. He is not well known in the Arab world and is certainly a bigger name in Britain, where in the 1980s and 1990s, as a flamboyant publisher, he was famous for surrounding himself with clever and beautiful women from the upper echelons of society whom he hired as editors at Quartet, his publishing house. But before the Oxbridge beauties, the cocktail parties and the rug-lined Soho offices, Mr Attallah was a banker and one of Mr Beidas's closest confidants within Intra. Amid the legal debris of the collapse, Mr Attallah was named as executor for Mr Beidas - a role that, despite his success in other areas, would haunt him for decades.

In 1995, a summons was issued by a Lebanese court on behalf of the Beidas family, accusing Mr Attallah of breach of trust in his handling of the aftermath of the downfall. He fought and won the case. In 2006, on the 40th anniversary of the collapse, I interviewed Mr Attallah in his Shepherd's Market office, deep in the heart of London's Mayfair. A Filipino housekeeper opened the door and I was shown up wooden stairs to small office packed with the souvenirs of a media life, including dozens of photos of Mr Attallah hobnobbing with the great and the good of showbiz.

He was exactly as I had remembered him 20 years earlier when he took me on at Quartet, no doubt as a favour to my despairing parents. "The whole affair showed an inherent corruption and vindictiveness in our society and Beidas was the victim," Mr Attallah said, his voice getting louder with each word as his expression grew more pained. "When there is a run on a bank, in every civilised economy in the world the central bank comes to its aid. When a mob tried to ransack the British Bank of the Middle East in Beirut, the central bank stepped in and it wasn't even an Arab bank; it was British. In the case of Intra, it did nothing."

According to Mr Alamuddin's book, days before the collapse, Joe Oughourlian, the deputy governor of the central bank, berated Mr Beidas at a meeting in Washington. "Why did you do it? Who asked you to?" asked Mr Oughourlian, referring to the vast assets Mr Beidas had amassed with Intra. "You are not Lebanese and Lebanon doesn't want you in control of its economy." I put it to Mr Attallah that, although Intra was a beacon for Lebanese banking if not a beacon for the country, did he not think it was destroyed because ultimately the state didn't want outsiders like Mr Beidas to possess so much power?

"They hated Beidas," said Mr Attallah. "Here was a man who came from nowhere, who suddenly became the most powerful among them. But he was a foreigner. What do you expect? They were very happy when Intra collapsed. The bank was a threat and they couldn't compete." He sat back in his chair, and added: "It destroyed the financial credibility of Lebanon and I don't think the country has recovered since."

There are many who would disagree with Mr Attallah. Lebanon's banks are enjoying a golden age of sorts but there is no Lebanese bank like Intra. Maybe it's better that way. Michael Karam is a freelance PR and media consultant based in Beirut @Email:business@thenational.ae