Graffiti announcing the "return of forensic auditing" on the side of a mountain road in the hills above Batroun. (Credit: Photo P.H.B.)
BEIRUT — A growing number of MPs have criticized caretaker Finance Minister Youssef Khalil's refusal to hand over the Banque du Liban (BDL) forensic audit report, which was compiled by New York firm Alvarez & Marsal (A&M). MPs including Samy Gemayel (Kataeb), Jamil Sayed (independent, Baalbeck-Hermel), and Ibrahim Kanaan (FPM), brushed aside the justifications given by the minister and former BDL executive for refusing to reveal the document.
The courts have also ruled on the matter. In a decision handed down on Monday, the Council of State ordered the Minister to hand over information and documents relating to the forensic audit to the NGO Legal Agenda. The latter had lodged an appeal on behalf of a coalition comprised of the Lebanese Transparency Association (LTA), the Lebanese Association for Taxpayers' Rights and Information (Aldic), the NGO Kulluna Irada, University of Saint Joseph's Observatory for the Civil Service and Good Governance and the Beirut Bar Association's Observatory for Depositors' Rights. Administrative Judge Carl Irani notably rejected the argument of protection of economic public order put forward by the Minister to justify his refusal to transmit the report.
The forensic audit of the accounts was carried out by A&M and was commissioned by the government for the first time in 2020. According to a Ministry of Finance source who requested anonymity, Lebanon has paid the bulk of the $2.74 million owed for the service. This is the amount paid for the second contract, as per the copy viewed by L'Orient-Le Jour in 2021. The first contract was set at $2.1 million when the operation was first attempted.
At the end of June, after months of no new developments, A&M submitted its report to the Ministry of Finance, which has still not divulged its contents, provoking strong reactions from Lebanon's political class. Khalil blamed his withholding of the report on the contract he signed with A&M on behalf of the Lebanese state.
The Minister's arguments
This argument was relayed by several MPs, who posted the Minister's reply letter to them on social media. In last week's letter, Khalil asserted that the report was a "draft of the preliminary report" and was not ready for publication. He also pointed to provisions in the contract between the Lebanese government - represented by himself - and the auditing firm. According to the contract, the report would be handed out on a non-reliance basis, absolving A&M of responsibility on the matter. The contract also indicated that the preliminary forensic report must remain confidential.
The Minister stressed that his role is solely to represent the government and facilitate liaison between the government, BDL, and the auditing firm, and then to present A&M's final report to the government in compliance with the conditions set out in the article 5 of the contract. According to the Minister, article 5 stipulates that parties who obtain a "copy of the final report" may only use it for information purposes (a "non-reliance basis"), may not unveil its content, and may not hold the firm liable by reference to its content.
Finally, the Minister said he requested that A&M disclose the contract to the public, to spare the government of the "penalties" stipulated in the contract.
Irony and reminders
"Are you afraid of a lawsuit that costs us one or two million dollars, when 74 billion dollars have evaporated?" MP Jamil Sayed wrote on Twitter. Samy Gemayel insisted that the Minister "publish the report immediately, to enable Parliament to exercise its control."
On Monday, Ibrahim Kanaan, Chairman of the Parliamentary Finance and Budget Committee, sent a second request for a copy of the report. He invoked article 5 of the contract.
When contacted, Kanaan insisted that article 5 of the contract refers to the "preliminary version" of the report, not its final version, and that the contract makes no mention of a possible "draft report" that the auditor would have to transmit to his client. "The Minister's position is insupportable," he added.
The audit of BDL's accounts is one of the essential preconditions for the release of aid from the International Monetary Fund (IMF), but the forensic accounting aspect has not been expressly demanded by the institution, even though part of the political class has insisted on it.
A&M, whose primary specialty is restructuring, was not the first choice to carry out the forensic-accounting part of the audit of BDL's accounts. Authorities have still not clearly communicated the results of the two other auditors appointed in 2020, KPMG and Oliver Wyman.
