A Mideast version of the Bernie Madoff scandal is threatening to tarnish Hezbollah's reputation in Lebanon for being incorruptible, and the powerful Shiite militant movement faces calls to bail out small investors to keep its position from being undercut.
Hundreds of Lebanese sold land or drained their retirement savings and handed over hundreds of millions of dollars to Salah Ezzedine, a Shiite businessman with connections to Hezbollah.
The anti-Israeli Hezbollah is on a U.S. list of terrorist organizations and maintains the strongest military force in Lebanon. For its Shiite followers, however, it is seen as a trusted quasi-government that provides social services and aid. The group gets substantial funding from Iran and paid out millions to rebuild the Shiite heartland in south Lebanon after a devastating 2006 war with Israel.
Hezbollah has said it had nothing to do with the alleged swindle and has so far resisted pressure to rescue the investors.
Nevertheless, many investors put their trust in Ezzedine, principally because of the financier's connections to Hezbollah and because of his reputation as a pious, respectable Shiite. Ezzedine's investment company promised as much as 40 percent in annual returns, according to residents of this southern Lebanese village.
Ezzedine and his partner, Youssef Faour, have been arrested on suspicion of cheating investors out of perhaps up to $1 billion, prosecutors say. Earlier this month, they were charged with fraudulent embezzlement, a crime punishable by 15 years in prison. Alleged victims included well-off Shiites but also smaller investors who sold land or pulled out savings to bundle the cash and give it to Ezzedine.
Lebanese are comparing to the swindle by Madoff, now serving a 150-year prison sentence for masterminding a multibillion-dollar scheme that burned thousands of investors.
Hezbollah leader Sheik Hassan Nasrallah earlier this month denied the group had any connection with the financier. A parliament member from Hezbollah reportedly lost money with Ezzedine and is suing him - a sign, the group's supporters say, that it, too, was victimized.
Still, Hezbollah is trying to ward off any blow to its status among loyalists. Nasrallah spoke recently by video link to a group of investors in the south to hear their complaints and reassure them, although he made no promises of compensation, according to an investor who lost money, speaking on condition of anonymity because of the sensitivity of the meeting.
The losses among people of all economic levels have stunned Shiites, who hold an abiding faith in Hezbollah's integrity and incorruptibility. While many still vow loyalty to the movement, they feel it should support its followers and pay compensation.
"That is what we hope," Wajih Shour, an investor from Toura, told The Associated Press. He said he paid several installments - including one of $150,000 - into the scheme. He refused to say the total amount he invested with Ezzedine but showed two checks worth hundreds of thousands of dollars that were given to him by one of Ezzedine's companies as a guarantee on his investment. The checks bounced because there was no money in the accounts, he said.
The 47-year-old Ezzedine was well-known for his religious works and charity in the southern port city of Tyre and surrounding Shiite villages. He had personal connections with Hezbollah figures - as any major businessman in the south would. He owns the Dar Al-Hadi Publishing House, one of Lebanon's most prominent producers of Shiite religious books that also prints books written by Hezbollah officials, and the children's TV channel Al-Hadi.
Among his charitable works was largely financing a giant mosque in the center of his hometown of Maaroub. A sign at its entrance says it was inaugurated in 2005 under the auspices of Nasrallah. A nearby municipal stadium was also financed by Ezzedine and was named "Stadium of the Resistance and Liberation Martyrs."
Judicial officials said Ezzedine had major business interests, particularly in oil and iron industries, in Eastern Europe and suffered substantial losses when oil prices fell last year. They added that Ezzedine tried to make up for his losses by taking money from Lebanese investors. They have not detailed what Ezzedine did with the money or where the funds are now.
In Maaroub, a town of about 4,500 people, no one was home at the financier's large villa surrounded by a garden. Residents refused to say anything bad about Ezzedine, insisting he is a decent man.
Rida Dbouki, 75, has known Ezzedine since he was a little boy and describes him as a "man who did all the good for this village." Asked about the losses, the grocer said, "We don't know how all this happened."
Another Maaroub resident, Hussein Khalil Khamis, 78, recounted how Ezzedine paid for his wife's diabetes and high blood pressure medications that he could not afford - amounting to $200 a month.
Only one man in Maaroub, who identified himself only as Abu Ali because of the sensitivity of discussing the scheme in Ezzedine's hometown, acknowledged he invested a small amount of money, was promised 40 percent in annual return and never got it back. He would not say how much he invested.
He said dozens of residents sold plots of land or took their retirement funds and invested them.
Investors in Maaroub and the nearby town of Toura told the AP that those who wanted to invest $100,000 and above could go directly to Ezzedine's office in nearby Tyre. Those who had amounts less than that gathered their money and gave them to a person they trusted to invest it for them.
Fadi Ajami, owner of a hardware shop in Toura, said he and a friend each invested around $500,000, plus another $3 million bundled from dozens of his neighbors. Now he's trying to pay them back from his own funds, returning $390,000 so far after selling property and using his savings.
Ajami proudly proclaims himself a Hezbollah supporter - his office is decorated with pictures of its leaders, including Nasrallah and its military commander, Imad Mughniyeh, who was killed by a car bomb in Syria last year.
"What really hurts is that those people (Ezzedine and Faour) used their connections with Hezbollah as a cover to gain people's trust. Hezbollah had nothing to do with them," Ajami said.