Cover story When Salah Ezzedine's alleged pyramid scheme collapsed, it left thousands of Lebanese Shia with empty bank accounts - and presented Hizbollah with a crisis of authenticity. Joshua Hersh reports from Beirut.
Follow the money
When Salah Ezzedine's alleged pyramid scheme collapsed, it left thousands of Lebanese Shia with empty bank accounts - and presented Hizbollah with a crisis of authenticity. Joshua Hersh reports from Beirut. In retrospect, there were plenty of signs that Salah Ezzedine's investment operation did not entirely make sense. The promised rates of return - 40 per cent, 60 per cent, 80 per cent - would later get the most attention, but surely the paperwork ought to have set off alarm bells as well. By nearly all accounts, the sole record that Ezzedine provided to his many clients in Lebanon's mainly Shia south was a cheque for exactly the amount they had invested with him. No quarterly statements, no balance sheets with pie charts and annuities and APRs. So long as they enjoyed collecting regular payments on their investment, all Ezzedine's clients had to do was keep that cheque safely tucked away in their wallets. If they ever wanted out, they could take it down to the bank, and the money was theirs. Of course, that was assuming there even was paperwork. Ezzedine, who was arrested in August for allegedly defrauding thousands of individuals, was so trusted in South Lebanon that, especially towards the end, few of his customers bothered to ask for anything like a receipt, or, for that matter, where the money was being invested. When they did, the answers he is said to have offered were as varied as they were suspect: steel, diamonds, titanium, zirconium, gold mines and petrol in Iran, oil in Eastern Europe, oil in Africa, iron in the Gambia, shoes and leather in China, defective clothing (for resale as fabric), old ships (for resale as scrap metal), construction in the Gulf, poultry in Brazil. Then again, the dividends had always arrived on time. "When he said the money would be in your hands in 200 days, it would be there," one investor told me. "Not 201 days, not 202." Among a certain portion of Shia society, Ezzedine earned renown as a patron, a father figure; he was "Haj Salah" - "an angel" in the words of one investor, "close to perfection," according to another. The whole South, it seemed, was benefiting from Ezzedine's largesse, and not just through the donations he frequently made to local charities or the medical supplies he provided for the ill. As the mayor of Maaroub, the southern village where Ezzedine was born, told me last autumn, it seemed for a time like everyone in town was trading in their beat-up sedans for brand-new BMW X-5s or Cadillac Escalades. The Shia of South Lebanon have long been defined by their poverty and squalor, and so the great wealth that Ezzedine brought to his corner of the country may have seemed like another sign that something was amiss. But the riches that Ezzedine showered on his investors were only one part of a prevailing trend: the South was changing, and Lebanon's formerly-poor Shia had been rising steadily toward prosperity. Once the poorest sect in the country, their ranks now included some of the richest individuals in Lebanon, Ezzedine, evidently, among them. This being South Lebanon, no entity was more closely tied to this shifting economic reality - as both catalyst and beneficiary - than Hizbollah. It is perhaps not surprising, then, that when Ezzedine's business dealings suddenly went sour all eyes turned to the party. According to residents of the South, and several people affiliated with Hizbollah, Ezzedine went missing in August. In a fit of desperation, he had called up a wealthy Lebanese friend and asked to borrow several million dollars, promising to pay it back in 10 days, and then disappeared. His friends and family worried that he had been kidnapped. Around the same time, a Hizbollah member of parliament named Hussein Hajj Hassan decided to cash out his investment with Ezzedine. He took his cheque, for $200,000, to the bank, and received an unwelcome surprise: the account was empty. Ezzedine was broke. Hizbollah then took the lead in the search for Ezzedine. According to party and legal sources, Ezzedine tried to throw off his pursuers by placing mobile phone calls from his hiding place in Beirut using foreign SIM cards. Finally, Ezzedine's driver gave him up to Hizbollah, and the party videotaped the capture and held Ezzedine for several days, hoping to learn what he had done with the money, before turning him, and the videotape, over to the police. When the dust settled, some 10,000 Lebanese Shia had been bilked, collectively, out of approximately $300 million. (Initial news reports put the figure as high as $1 billion, but that calculation included the loss of non-existent "earnings".) In many cases, the sums amounted to an entire life's savings, and more. I met one southern merchant who told me he had sold two apartments he owned in Beirut and ploughed the profits - plus his other savings - into an account with Ezzedine; he lost $500,000. "I'm willing to die," he said. "But just give me back the money, so I can give it to my children." In the press, Ezzedine became "the Lebanese Bernie Madoff" - a reference to the New York financier who defrauded an array of high-profile investors out of $50 billion - but it was his apparent links to Hizbollah that proved irresistible to the media. In addition to the news that MP Hassan had been one of his investors, there were reports that Ezzedine had a close relationship with party leaders. It was said that he could arrange a meeting with Hizbollah's secretary general, Hassan Nasrallah, "within a few minutes" (although this was something that, if true, would not be unique among major businessmen in the South). Meanwhile, investor after investor told reporters they decided to entrust Ezzedine with their money because they believed him, correctly or not, to be backed by Hizbollah. The implication, savoured in the Western media and certain portions of the Lebanese press, was that Hizbollah may have played a role in facilitating Ezzedine's business - and could thus be considered complicit in whatever corrupt dealings he had. As the Financial Times wrote, the saga "threatened to embarrass Hizbollah," which "prides itself on its austere religious image." NOW Lebanon, a news website backed by figures close to the governing March 14 alliance, put it more succinctly: "Ezzedine Shows Hizbollah's Moral Bankruptcy."
Hizbollah vigorously denied the reports of an official relationship with Ezzedine, and in the months that have passed since the scandal broke, no convincing evidence of one has emerged. (In fact, very little about Ezzedine's operation has been determined - it is still not known, even to prosecutors, whether Ezzedine was corrupt from the outset or, as he claims, merely the victim of bearish markets and business dealings gone bad.) But the party was clearly concerned about the fallout from the episode. Early news reports from the South indicated that, no matter who turned out to be at fault, victims of Ezzedine's scheme were determined to hold Hizbollah accountable for their losses. The party formed a "crisis network" to help investors who had lost their savings and started a fund to get people back on their feet, although they limited their aid in an attempt to avoid the appearance of accepting responsibility for the losses. Hizbollah's leader, Sayyed Hassan Nasrallah, who is typically more comfortable above the fray, addressed the controversy twice in the weeks after Ezzedine was arrested, taking pains to argue that Hizbollah was as much a victim as anyone else. If Hizbollah seemed to be on the defensive, it was not without cause. The Ezzedine scandal may not have reflected directly on Hizbollah, but it had clearly revealed both a fissure in the party's carefully cultivated image and a threat to its unity - one that was directly related to the South's growing prosperity and the party's concomitant move toward the political mainstream.
Since 1992, when Hizbollah decided to enter electoral politics in Lebanon, the party had undergone a subtle transformation from within. As the country's civil war came to an end, Hizbollah was the only major combatant to retain its weapons, doing so in the name of resistance against Israel, which still occupied portions of South Lebanon. But the party also needed to retain its claim as the voice of the voiceless - another key to the legitimacy of a party whose roots lay in the political mobilisation of poor Shia in the 1970s. But while normalisation and immersion into mainstream politics has not led to Hizbollah's disarming - a point of great contention in Lebanon and beyond - it did mean that top officials in the party increasingly encountered the trappings of political power, and a new class of elite Shia emerged. For Hizbollah's supporters, this has raised a fundamental question, which the Ezzedine scandal cast in a new light: As Hizbollah transitioned toward the centre of political and economic power, and away from its origins as a radical militant organisation, could it be assured of maintaining the loyalty of its supporters - particularly those, like Ezzedine's victims, who have been left behind? In 1999, a Lebanese-American academic named Lara Deeb met a prominent Hizbollah figure for an interview. "He was thin and young," she recalled recently. "He didn't seem to care much about his appearance." She described him as having "that Revolutionary look" - meaning the Iranian Revolution - with a trimmed beard and nondescript clothes. When Deeb, who wrote a book on Lebanon's Shia, met the same official seven or eight years later, he had risen in the party establishment - and it showed. "He looked totally different," Deeb said. "He wore Diesel jeans and a designer watch and was smoking a big Cohiba. The transformation was amazing." In the aftermath of the Ezzedine scandal, transformations like this were the subject of a lot of discussion in Beirut. People would point out that the party's MPs (of which there are now 10) drive around town in BMWs and Range Rovers, and dine at fancy restaurants. More than one concerned Hizbollah supporter told me that in the Dahiyeh - the southern suburbs of Beirut mostly inhabited by Hizbollah backers - many Shia women had taken to wearing designer-label headscarves worth $300. In early October, Ibrahim al Amin, the CEO of the generally pro-"resistance" newspaper al Akhbar, suggested that the scandal was "a warning" for Hizbollah: "It is extremely odd that this society", al Amin wrote, referring to Hizbollah's supporters, "which had for generations followed an ascetic lifestyle, suddenly decided to switch to one that entails living beyond its means - [one] that is incompatible with the principles of asceticism and self-sacrifice for a cause that calls for sacrifice in human life and human blood." Soon others piled on. In the pages of al Akhbar, a series of op-eds debated whether, in acceding to the capitalist impulses of modern society, the movement was losing sight of first principles. In its most extreme formulation, as the al Akhbar reporter Amal Khalil, a resident of South Lebanon, expressed it to me this autumn, "There is a worry that if [some members] live this luxury life, they won't be anymore willing to fight or struggle or die."
A few weeks after the Salah Ezzedine news broke, I drove into South Lebanon to survey the damage. My first stop was the village of Sh'hur, just below a bend in the Litani River, where I met Ali Zain, the town's ebullient mayor, who I had been told knew Ezzedine personally. Zain works out of a spacious office in Sh'hur's municipal building, which he had decorated himself in what might be called upscale bachelor pad chic: black leather couches, copious communications equipment (mobile phones, landlines, radios), a variety of samurai swords. Since arriving in town, I been struck by the place's surprising affluence. Sh'hur is not your ordinary southern village, or at least, it's not what you'd ordinarily expect to find in Lebanon's mainly agricultural South. The streets are wide and neatly paved, with high curbs and evenly spaced trash bins and public benches, all outfitted with a certain civic uniformity. "You don't see this in the southern villages," my translator, a Lebanese journalist named Moe Ali Nayel, remarked as we drove through town. "This is totally new to me." It was evident that the economic condition of Lebanon's Shia had changed substantially. For decades, they were considered "the garbage collectors of Lebanon," the nation's "despised stepchildren", and cursed as mitweleh - a derogatory racial slur. As Lebanon's most dispossessed caste, they were also primed for political mobilisation, which is what Hizbollah did in the early 1980s, when it introduced itself as not merely as an Islamic resistance movement against Israeli occupation, but as a voice for "the downtrodden in Lebanon and the world." Part of the long-standing promise, and appeal, of Hizbollah was that it would help the Shia fight a system that had chronically neglected them. But by 2008, when the UNDP and the Lebanese Ministry of Social Affairs looked at the economic situation across Lebanon, the Shia were no longer the poorest sect. Instead, the report determined that the country's largely Sunni North now had even higher rates of poverty.
What had happened was not the end of Shia poverty, but the arrival of the Shia millionaire. (That same UNDP study found 42 per cent of the South living in poverty.) Lebanon's Shia had been moving abroad in search of economic opportunities for almost a century to places like Nigeria, Sierra Leone, Chile and Australia - a migration whose pace quickened beginning in the 1970s as Lebanon's civil war exploded. Although some took part in unsavory businesses like oil or diamonds, many found untapped potential to make a living in mundane businesses: generator sales, plastic chair manufacturing, supermarkets. In fact, in many cases, they made not just a living, but a killing. One banker told me that a young person from the South with the right connections could go to Africa today and become a millionaire within a couple of years. "And not just one or two million," he said. "We're talking many millions." Salah Ezzedine's life, as various acquaintances and news accounts have sketched it, appears to mirror this rise. Ezzedine was born in 1962 in Maaroub, a village a few kilometres from Sh'hur, to an upwardly mobile family. His father owned property and a business - a fabrics shop - in downtown Beirut, and the family spent much of their time away from the South. When he was a teenager, residents in Maaroub recall, Ezzedine was as ambitious as he was industrious, and he would often spend his free time working at his father's shop. When his father travelled abroad to buy wholesale, Ezzedine would run the shop himself. Ezzedine's family is thought to have made some of its money in Latin America - people in Maaroub told me they believe members of his family had fled to Santiago, Chile, after the arrest. Ezzedine's own international connections are harder to pinpoint, but his ambitions have always laid outside Lebanon. His first commercial enterprise, which he started in the 1980s, was a travel agency that led haj expeditions to Mecca. He had a partner in that initial business, and sometime later split off to form his own haj initiative, which he called Bab Salaam - the Door to Peace. Bab Salaam hajjs were five-star affairs, famous around the South for their extravagance. "Ezzeddine's style was everything had to be the newest, the best," a Maaroub resident named Abu Islam told me. "For transportation, he'd have a brand new bus, with zero mileage. The hotel they are staying in, he would book it for the whole year." It was also, apparently, a money-losing venture, but the haj business served a second purpose: it helped Ezzedine establish close ties with both the Hizbollah political establishment and the local villagers, who would become his future clientele. He became, in the words of one Lebanese Shia, "Not just haj himself, but master of the haj." In the aftermath of Ezzedine's fall, the word "greed" could be heard across the south, in a widespread fit of self-recrimination, but a surer truth was that stories like Ezzedine's had helped create the impression that only a bit of good fortune separated poor and rich Shia - though in actuality the gulf was larger than ever. Near-instant wealth seemed not just possible but probable, and the South was ripe for a get-rich-quick scheme. "Being a successful businessman, and religious, that played into this image that we can trust him," Ali Zain told me when we met in his office. "His haj business helped a lot in creating this. That was one of the best in Lebanon. Maybe a bit more expensive, a bit of luxury - people felt good, they came back and said good things, and it played well to his image." "There's a saying in the South: 'Your money is your soul,'" Zain told me. "When people handed [Ezzedine] their money, it was handing him a piece of their soul. It's logical - whatever you achieve in life, it equals your life. For people to give up everything they earned and worked for, it means they had no hesitation." And when the people lost their money with Ezzedine, "It was as though they had lost their souls."
The obvious question is whether the party is at risk of losing its own "soul" - in this case, the staunch and unwavering support of its Shia constituents in the south - in the process of moving from the armed periphery to the governing centre. Analysts have waged fierce debates about whether Hizbollah's recent governing responsibilities will move its agenda in a more moderate direction. Whether the financial perquisites of power might precipitate a similar shift - and, in turn, separate the party's leaders from its supporters - is anyone's guess. Critics and allies alike note a certain cognitive dissonance that exists between the ascetic image the party prefers to project, and the practical realities of its proximity to power. Amal Saad-Ghorayeb, a Lebanese academic who is close to Hizbollah's political element, calls this "the Nasrallah effect". "People look at Hizbollah through the prism of [Nasrallah], and he represents austerity. This is a guy who lives underground, he doesn't see the light of day, he's a Sheikh, he doesn't wear fashionable clothes, he sacrificed his son to martyrdom. You expect everybody to be like him, and when you see a discrepancy, you feel there is something wrong going on." The result is what Khaled Saghieh, the editor of al Akhbar calls "a problem of identity". That is, a party member might find himself saying, "I identify with Nasrallah, but so does Salah Ezzedine. How can that be?" But does this sense of alienation exist among the party rank-and-file? Thanassis Cambanis, a journalist whose book about the Shia allegiance to Hizbollah, A Privilege to Die, comes out this fall, told me he has never encountered this sentiment in the South, although he acknowledges that it would not be inconceivable. "If you start to see party members all driving great big SUVs while everyone else has normal cars - or if Hassan Nasrallah started living in luxury," he says, "that would start to compromise Hizbollah's appeal." One Hezbollah supporter told me in dismay that he had heard reports that the daughter of Imad Mughniyeh, the Hizbollah military commander assassinated by Israel in 2008, had been spotted dining at an upscale restaurant in Verdun, a trendy Beirut neighbourhood. "I was horrified!" he said. Hizbollah figures, for their part, contend that there is no contradiction. When I spoke to Ibrahim Moussawi, the party's spokesman, he told me that wealth was not a concern for Hizbollah. "There's no problem with enriching yourself as long as it does not involve anything haram," he said. "Even during the Prophet's time there has been rich people and poor people. Khadijah" - the Prophet Mohammad's first wife - "was a rich woman actually, a merchant. In fact it's said that had it not been for Khadijah's money, a lot of the work of the Prophet never would have happened." This, of course, is true for Hizbollah as well - were it not for the wealthy members, and wealthy patrons, Hizbollah would have a hard time carrying out social-services projects, let alone arming its militias. Considerable sums also flow to Hizbollah from Iran - some say up to $100 million a year - but Nasrallah himself, in a 2006 speech, felt the need to assert the piety of these funds, referring to Iran's contributions as "pure money". Ali Fayyad, a newly elected Hezbollah MP, also defended the righteousness of wealth accumulation. "We hate poverty," Fayyad told me. "Imam Ali, he said, 'If poverty were a man, I would kill him.'" But, Fayyad continued, "Hizbollah, it is not a small party anymore, a minority, it is a whole society. It is the party of the poor people, yes, but at the same time there are a lot of businessmen in the party, we have a lot of rich people, some elite class. This is normal, because Hizbollah has become one of the biggest parties in Lebanon." Internally, however, there is evidence that party figures have grown concerned about the appearance of great disparities in wealth among their ranks. Describing the aftermath of the Ezzedine scandal, Amal Saad-Ghorayeb noted, "there was a lot of - not soul searching, per se - but I would say they're more conscious of the image they project." After Ezzedine was arrested, according to a rumor that made the rounds in Beirut last year, Hassan Nasrallah was so concerned about the effects of conspicuous wealth on party unity that he called in the wives of the party's MPs and demanded to know how much their headscarves cost. When I asked Fayyad about this rumor, he dismissed it with a laugh. "Our party," he then said, "took some procedures after Ezzedine's problem to prevent any similar phenomenon, and to prevent any bad side effects." He declined to specify what precisely those procedures had been. Cambanis thinks that the Ezzedine scandal, far from revealing some weakness within Hizbollah, may actually demonstrate the party's resilience. "If all those revelations came out, and that doesn't shake public support," he said, "it argues for the case that Hizbollah has succeeded in building a big tent party."
For now, much remains unknown about Ezzedine's story, and it seems doomed to remain that way. Since his arrest, Ezzedine has been in Roumieh prison, while the government undertakes the slow process of investigating his actions. For a while, prosecutors appeared to have set aside the criminal case to focus on determining whether Ezzedine has any assets that could be liquidated in order to repay his investors. This week, however, the judge investigating the Hizbollah MP Hussein Hajj Hassan's claims against Ezzedine found cause to bring the case to trial, and recommended that Ezzedine be sentenced to three years in prison. Ezzedine has yet to speak publicly about the case, and has apparently discouraged his supporters from doing so as well. (His lawyer, Ali Achi, declined to speak to me for this article, or make Ezzedine available to answer questions.) Kamal Haidar, an attorney who is suing Ezzedine on behalf of a dozen investors, told me that he does not expect to recoup any of his clients' losses. "There is no hope," he said. "Maybe I will get back five or 10 per cent for my clients. But not now - not for three or four years. There is no money." Meanwhile, Ezzedine's investors in the South are left to sift through the rubble of yet another catastrophe, and wonder whether they were duped, or just unlucky. Hassan Fneish, the mayor of Maaroub, told me in the fall that he has a hard time believing that Ezzedine was a fraud, but he doesn't discount the possibility. He knew Ezzedine as a generous, and anonymous, donor who helped Maaroub rebuild its sports stadium and mosque after the 2006 war. "In different circumstances, you might think the guy is playing a role, just acting this way," Fneish told me. "But he didn't even ask people to invest. They wanted to get rich off him. And for a while, they did."
Joshua Hersh is a journalist living in Beirut whose work has appeared in the New Yorker and the New Republic.