Middle East Madoff

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MARCO WERMAN: Lebanese have been riveted for the past few weeks by the arrest of a man people are calling the Middle East Bernie Madoff. The man's name is Salah Ezzedine. He's a religious Shiite said to have close ties to the militant Islamic group Hezbollah. Authorities say Ezzedine ran a pyramid scheme that bilked investors out of a billion dollars. The World's Aaron Schachter has the story.


AARON SCHACHTER: Yarun is an idyllic spot in the hills of south Lebanon. It's a village of large old homes and even larger new ones. That's because almost all the families here have relatives earning money overseas that they send home. Many here had hoped to grow their money with Lebanese financier Salah Ezzedine. This investor, who owns a taxi company in Australia, didn't want to give his name. He invested 50 thousand dollars with Ezzedine just three months ago. He admits it did seem too good to be true, but--

TAXI COMPANY OWNER: Well, everybody look for the interest, mate, because he give the interest very high. That's the problem. Everybody he's stupid.

AARON SCHACHTER: Well why did you give him money? Why did you give him money?

TAXI COMPANY OWNER: Well I asked my friend, he said he gave him interest, that's the problem. You know, I said maybe he's alright, you know, I trust him. But this man maybe about eight years, I think, he [INDISCERNIBLE] business. But you can't trust anyone.

AARON SCHACHTER: Ezzedine was promising returns of no less than 40 percent, and as in any good pyramid scheme, a lot of people did get returns on their investments, for a while. Many investors, the vast majority fellow Shiites, gave their money to Ezzedine because of his reputation as pious and charitable, and because of his connection to Hezbollah, known among Shiites here as an incorruptible institution. But these men, whose families collectively lost more than a million dollars, say Hezbollah has nothing to do with the scandal.

THREE MEN: Nothing, no, no, no, Hezbollah no. People are stupid. People are stupid. Nobody tell you or push you to put the money from Hezbollah. No, no, no. No, no, no. No, no, no. I see a friend, he put the money, he get the money interest good, I said alright, I put a little bit more. Everybody like, you know, he's a friend, tried to put more. That's all.

AARON SCHACHTER: But now Ezzedine is bust, and these men tell me more than half the village of six thousand is out money. They say losses here total a staggering 162 million, 504 thousand dollars, give or take. Despite these men's protestations, some are now calling on Hezbollah to repay the money that Ezzedine is said to have lost, perhaps as much as a billion dollars. That's a large chunk of change, even for an organization supported by oil-rich Iran.


AARON SCHACHTER: Hezbollah is still paying a hefty sum toward the reconstruction of homes, like these in the town of Bint Jbeil, after its devastating month-long war with Israel three years ago.


AARON SCHACHTER: Hezbollah's leader has denied any connection to Ezzedine, but he's assured investors he would look into the matter. Bernie Madoff's investors have called him scum and much worse. Yet many people here who lost their savings don't seem that upset with Ezzedine. One man in Yarun asked "Do you want me to go around crying all the time?" In Maaroub, where Ezzedine is from, people still regard him as a rags-to-riches hero. Hussein Ezzedine is a distant relative.

UNIDENTIFIED MALE: [TRANSLATED TO ENGLISH] If you ask anyone here in the village they'll say he was good. He helped everyone, the poor, people with diseases, and people with kids wanting to put them in school and couldn't afford it. He built a soccer field here. He bought other things for the village, bought people tractors, and without ever asking anything in return.

AARON SCHACHTER: No one seems to know exactly what Ezzedine did with the money he took, and most of his investors seem to feel that Ezzedine was a victim too. If the global economy hadn't soured, he could've gone on indefinitely, and they could have kept making money. Ezzedine and a partner are now in prison, they've been charged with fraudulent investment, a crime punishable by 15 years in prison. For The World, I'm Aaron Schachter, Yarun village, southern Lebanon.