ROLE OF CENTRAL BANK, THE HIGHER BANKING AUTHORITY, AND THE BANKING CONTROL COMMISSION (BCC)
It seems that the Banking Control Commission (BCC) had many doubts and serious concerns about the situation at Bank AI-Madina and have sent many letters to the bank in that respect.
This is obvious from their letters to the Governor of the Central Bank in August 2000, September 2000, and October 2000.
The BCC have asked a team from the BCC auditors during December 2000, January and February 2001. The BCC audit team concluded that the statements presented by Bank AI-Madina were falsified and there was double accounting being practiced at the bank which is a very serious matter and that the statements could not be trusted. In March 2001, the BCC suggested to the Governor to refer the bank to the Higher Banking Authority and appointing a temporary manager for the two banks (Madina and UCB) and appointing an additional external auditor to the bank.
The Governor informed Madina on March 1ih 2001 that a new external auditor (Deloitte & Touche) was appointed to perform an investigation mission of finding out the real situation at the bank. (Rana acknowledged receipt of the Governor letter)
On June 13th 2001 the BCC submitted their report to the Governor of the Central Bank in which the results of the investigation of Deloitte and Touche was revealed which showed many violations, noncompliance incidents and unclear banking operations. The BCC suggested the appointment of a new general manager with wide authorities and to also expand the mission of Deloitte & Touche to become a comprehensive audit of Madina and to know the reality of the banking operations.
In June 2001, and after the BCC report, the situation at the bank appears to be an almost panicky situation. During June 2001, the Board of Directors met 5 times and took drastic decisions in an attempt to ease the BCC and Central Bank concerns. More than 8 letters were sent to the Governor of the Central Bank and they all revolve around the measures being taken by the bank to improve the situation, correct the errors, sending more money, setting up new committees (audit, loans, IT, etc..). The chairman of Bank AI-Madina was summoned to attend a meeting at the Central Bank but Mr Ibrahim apologized for not being able to attend due to previous trip engagement and appointed Mr Abd Nour (although he resigned earlier???) to represent him.
We believe that when all the above attempts didn’t work out, somebody forged Dr Adnan Abou Ayyash signature in a letter sent to the Governor (28 June 2001) in which a pledge for a transfer of $200 Millions was made latest August 31st 2001).
The Governor decided to appoint Deloitte & Touche again for another mission of investigation at the bank.
At this time, another forgery of Dr Adnan’s signature occurred on a letter sent to the Governor stating that he will have more frequent visits to Lebanon and that he will be spending more time to oversee the operations of the bank closely.
I believe whoever did the forgery was trying to use Dr Adnan’s creditworthiness and his good reputation at the Central Bank in order to convince the BCC and the Central Bank to take their hands off and back off from their attempts to find out the reality.
Anyway, the attempt of convincing the Central Bank seems to have worked out after the said forged letter since the Governor backed off a little bit and suspended his decision to appoint Deloitte & Touche for the investigation mission in order to follow up on Dr Adnan’s claimed undertaking to put some order to the bank and transfer the money promised ($ 200 Millions).
During that time (from July to September 2001 the bank tried to publish their Financial Statements for the year 2000 but the BCC refused to allow them that before making sure the figures are correct.
On September 4th 2001, another letter was forged in Dr Adnan’s name which refers to Dr Adnan’s transfer of $ 150 Millions to Bank AI-Mad ina account at BDL (noting that he did transfer $ 150 Millions from UBS-Zurich to Dr Adnan’s account # 69911 at Madina on 27/8/2001). The letter asked the central bank for a period until end of 2001 to sort out the problems and organize the things at the bank.
In fact, the Governor of the Central Bank, after seeing that the money transfer was done, decided to give the bank until the end of 2001 to execute the promises of Dr Adnan provided that he provides them with the details of his steps and actions performed to rectify the situation.
The period from September 2001 to May 2002 was very calm in terms of communications between the bank and the Central Bank and the first letter was from the BCC to the Governor on May 16th 2002 in which they restated their concerns of problems at Madina following a review done and asked the Governor to take a decision in that respect.
The Governor then summoned the Madina Bank Chairman for a meeting on 22/May/2002 to discuss the bank situation.
A letter was forged in Dr Adnan’s name to the Governor on 21/May/2002 in which certain clarifications to the violations and mistakes were listed. It also refers to the transfer of $200 Millions to Bankers Trust which should add more confidence to the bank financial standing (noting that Dr Adnan’s did transfer $200 Millions on 27/December/2001 to his account 69911).
Another letter was forged in Dr Adnan’s name on 21/May/2002 to the Governor promising to transfer an additional $ 100 Millions latest June 15 2002.
On June 24th 2002, a letter was sent by Rana Koleilat and walid Nassif to the Governor confirming the receipt of a transfer for $150Millions and attaching a copy of the said Swift. This Swift is most probably forged since it is not sent by Dr Adnan and does not appear in Dr Adnan’s list of transfers sent from the banks and confirmed by them. This means that when Rana was not able to convince Dr Adnan to send a transfer for $100 Millions as promised to the Governor on May 21st 2002, she made up the transfer for $ 150 Millions to convince the Governor that everything was in order and that the transfer did come in.
In July, a report was sent by the BCC to the Governor restating their concerns. The Governor summoned the chairman of Madina bank to appear on September 2nd 2002 at the Central Bank to discuss the bank situation. The reasons stated were that the promises made by Dr Adnan need to be executed (taking over the management, rectifying the errors, appointing BOO Fiduciaire du Moyent Orient as additional external auditor, etc..)
On August 2th 2002, four more letters in Dr Adnan’s name were forged. The first letter was for the appointment of Abd Hafiz Barbir in which Dr Adnan’s signature appear as Chairman-General Manager for the first time. Another letter in Dr Adnan’s name appointed Rana and Walid Nassif to represent the bank at the Central Bank and BCC. The worst forgery was the third letter sent in Dr Adnan’s name (with Dr Adnan’s forged signature) on August 2th 2002 in which a pledge for transferring $ 500 Millions to the Central Bank was made in 5 equal amounts ($100 Millions each, on 29/8/2002, 29/9/2002, 29/10/2002, 29/11/2002, and 29/12/2002).
A fourth letter on August 27 2002 forged in Dr Adnan’s name was sent to the Governor of the Central Bank which replied to his letter dated July 18 2002 and tried to explain the actions taken by the bank and show that real measures were taken.
It seems the letters were not enough and the Governor (on September 2 2002) decided to disallow the bank from making further loans and ordered it to rectify the violations of the Central Bank directives immediately.
Another letter was then made in Dr Adnan’s name and Dr Adnan’s signature was forged on September 5 2002. The letter mentioned a meeting between Dr Adnan and the Governor on September 3rd 2002. There is also a pledge to transfer $ 100 Millions in preparation for the increase in Madina equity.
September 2002 witnessed many letters back and forth between the bank and the Governor concerning the loans of Zenta, Ali ahmad, Fadi Sobh, etc.
A letter in Dr Adnan’s name was made up on 19 September 2002 pledging to execute the Central Bank directives completely.
In October 2002, the BCC informed the Governor, that the problems of the bank were not solved and that more errors were found in their statements. They further asked the auditor BOO to confirm the bank account balances with its correspondents since they suspected those balances to be incorrect and misstated. On 26 October 2002, the BCC seem to have reached a decision that the situation was out of control and that no further solutions are possible and concluded that the situation of the bank necessitate the appointment of a temporary manager and the suspension of the operations of Bank AI-Madina and UCB (cancellation from the list of operating banks). This was mainly due to the forged bank statements, concealing of foreign currency positions, double accounting, many unresolved violations, the impossibility to confirm the account balances at the correspondents (especially Bankers Trust), the absence of the bank chairman from the meetings at the Central bank, the bank losses, suspicion of money laundry, etc..
As an attempt to ease the pressure, a letter was sent by Youssef Hishi and Kazem Bahlawan to the Governor of the Central Bank informing him that the account of Rana Koleilat contains $ 200 Millions and will transferred to the Central Bank for necessary transfer to Lebanese pounds and deposited in Bank AI-Madina account at the central bank. Rana signed on the letter for acceptance.
A letter was then forged in Dr Adnan’s name (on 31/10/2002) and sent to the Governor confirming that he will personally resolve the problems during November and that he invites the auditors to come in during December 2002 to investigate and verify the actions taken.
As a last resort, a final letter was forged in Dr Adnan’s name (on 8/11/2002) and sent to the Governor informing him that he is taking steps to merge the two banks and that this will require the preparation of certain documents and certain Board resolutions. This was the last unsuccessful attempt to delay the catastrophe which proved to be imminent.