The Italian Job

Lahoud summed it up better than most. Speaking to the cabinet during a discussion on the EDL file, the exasperated president turned to the ministers and raised his arms. “What do you expect me to say when you tell me that $3 billion has gone missing from EDL. I am speechless.”

EDL is indeed in a miserable state. It continues to be riddled with corruption, wasteful spending and mismanagement. By this summer, the company was in debt to the tune of $950 million with little to show for $1.5 billion of government investment. Since 1992, it has lost over $600 million in uncollected bills and another $230 million to illegal connections and technical problems. Things could hardly get worse – or could they?

In August, it emerged that arch-wheeler dealer Ahed Baroudi publicly admitted to bribing public officials on all levels and on numerous occasions to secure lucrative contracts worth around $750 million in the early 90s. His involvement in these deals has allegedly cost the state millions and is responsible for the dilapidated state of the national grid. Baroudi has not been officially investigated; probably because of his threats to disclose the names of high profile officials he claims took bribes. Ahed Baroudi has always worked the shady end of business. His name appeared in the murky demi-monde of dealmakers in 1974, when MEA bought three 747s from Boeing. The American aircraft manufacturer paid $3.6 million in commissions to a Swiss bank account in the name of a Rosera, on behalf of MEA executive (and future chairman) Assad Nasr and other parties working for or connected to the airline.

Although an open secret since the deal was signed, the payments officially came to light in 1979, when MEA sought to buy another 19 aircraft at a cost of $1 billion (the commissions on that deal would have been a whopping $30 million). An investigation by the US Securities and Exchange Commission (SEC) into the 1974 deal, forced President Elias Sarkis to call off the purchases, and created a scandal that reached the higher echelons of the Presidency and Intra Bank. The debacle effectively ended the career of Nasr, who had to leave the country, only to be allowed back after much string pulling.

However, one man, believed to be the architect of both deals, lurked in the shadows, relatively untouched by scandal. No one can say whether this secretive character was in fact Baroudi, but those on the inside believe he was the only one to hold onto his share of the fees paid by Boeing in 1974 Ð around $1.6 million Ð and point to the close ties he cultivated with President Sarkis. In 1982, Baroudi was himself famously exiled by Bashir Gemayel after an encounter at Au Vieux Quartier, when Lebanon’s youthful new leader, who had vowed to wipe out corruption, allegedly strode over to Baroudi’s table and gave him 24 hours to pack his bags, telling him, “the country is sick because of people like you.” Baroudi claims he left because the food was not to his liking. Baroudi returned in the late 80s to Amin Gemayel’s Lebanon expecting to carry on where he left off. He found Roger Tamraz and his advisors had become the favored dealmakers. Professionally, the two men were chips off the same block, but while Tamraz sought the limelight and gained notoriety, Baroudi bided his time, working diligently in the shadows, courting the patronage of those in power. It was a policy that paid off. Tamraz’s star waned, while Baroudi fought his way back into the game, recruiting Tamraz’s team along the way. After leaving during the Aoun war, he returned in the early 90s to carve out a lucrative niche at EDL, one of the few ministries not blocked to him. His calling card at EDL’s Mar Mikhael’s offices was his trademark $1 million gift.

In his new-found role as a key player in the state’s ten-year plan to rehabilitate the national grid – one which, among its many aims, sought to convert from fuel to gas – Baroudi set about beating off all other international bids to secure the contracts for the building of the Zahrani and Baalbek power stations, contracts worth a combined total of $300 million.

A senior EDL consultant at the time remembers the irregularities. In a letter to the board of EDL, sent on December 10, 1994, he protested that the 200-page rehabilitation plan was drafted in secret, outside the official framework of EDL, over a period of ten days. He went on to complain that there was no time for him or his colleagues to review the plan, which was, for the most part, devoid of page numbers, figures and tables. In a very sketchy financial plan, it was stipulated that all payments be made to Ansaldo, a company that had been earmarked for both the Badawi and Zahrani stations, even before the jobs had been tendered. The consultant was further mystified by the fact that only three years’ work was outlined in what was supposed to be a ten-year plan, and the cost estimates appeared to have been reached without due diligence. ”This is what we were told to do,” an exasperated colleague told him, when he was questioned about the report. It became clear to the consultant that the plan was imposed and not meant to be contested. The extent of the conspiracy was reflected in the speed at which the plan was rushed through parliament on the night of Saturday, December 10, 1994 (those who are convinced of Baroudi’s involvement in the 1974 MEA deal, point to the same way that agreement was rushed through on the eve of the meeting of the MEA board of directors on May 30, 1974. Baroudi, it seemed, liked a fait accompli.)

Baroudi was part of the EDL deals from beginning to end. After the signing of a $600 million Italian-Lebanese loan (one that he personally negotiated), earmarked for electrical equipment, three contracts were awarded to Baroudi, who was still the representative of Ansaldo.

The first deal involved the buying of new heavy equipment that was later discovered to be used and obsolete. The second was for the installation of $50 million worth of equipment for the Zahrani and Baalbek stations. Through its inside contacts, Ansaldo, via Baroudi, ensured that all other bidding companies never got a look-in. Such was the extent of Baroudi’s impudence that he installed the equipment, generators and machinery before the contract was officially awarded. The third deal was a $17 million maintenance contract, which was signed even though the equipment was under warranty. The $17 million was allocated for the maintenance of Lebanon’s gas-powered power plants – a system that was allegedly 30% cheaper, environmentally friendlier and more efficient. In 2000, after rumblings within EDL, the contract was re-awarded to the Italian company INNEL for $9 million a year, a saving of 40%. INNELÕs agent in Lebanon at the time was none other than Ahed Baroudi. The signing of the three contracts took place outside the supervision of CDR, which was supposed to, according to the protocol signed with the Italians, oversee all bidding, installation and maintenance.

Today, the equipment bought by the government and provided by Baroudi is still not connected to the electrical network, while the power stations require rehabilitation worth $200 million. There has never been any gas-generated electricity from the two plants, which run on a jury-rigged fuel system that has effectively destroyed the operational integrity of both stations. A report compiled by General Electric and sent to EDL on November 29, 1999, blames the use of incorrect fuel for the blowing up of the third turbine at the Baalbek power station. No one is absolutely sure of how deep the level of corruption ran in the ‘Italian Job.’ What is known is that the EDL case, was one of many that went to the very top of Italian politics and implicated the disgraced former Italian Prime Minister Benetto Craxi. In Lebanon today, nothing has changed. Baroudi and his ilk maintain their cover by cultivating friendly relations within political and key civil servant circles at the highest level. While most corruption is a smash and grab ‘career,’ Baroudi has lasted, and has never felt the long arm of the law.

Meanwhile, EDL is in a corner. The excuse that the main problem lies with unpaid bills is as weak as it is insulting to our intelligence. The public might be more willing to pay their bills if they see that EDL is putting its house in order. Maybe when that happens, the collectors will not need armed escorts to carry out their duty.

If EDL is keen to root out graft and corruption from its core, it is going about it in a very low-key manner. Corruption is a chronic sickness in any society and requires constant treatment. As the saying goes, it’s not the man in the fight but the fight in the man. Like Fuad Chehab, who built a state of law, President Lahoud has founded his term on rooting out graft. But such a campaign will only bear fruit if there is collective political support to fight those who rob the public and private purse.

Therefore, EDL must act to right the outrageous wrongs that have taken place in the past ten years. This is the perfect opportunity for a government, committed to showing the people that it is serious about tackling the legacy of a more sordid past. Either that, or those at the very top of EDL must make what would be an honorable and memorable move: they should resign. At least then they would be remembered for something. Executive investigated and published the EDL story in the public interest. Further cases involving Ahed Baroudi and others are still under investigation.