Goldman Sachs, which is at the centre of a £1bn court case with Libya's sovereign wealth fund, has been alleged to have wooed the fund's officials with prostitutes, fine-dining in London's best restaurants, five star accommodation and holidays, it was reported on Monday (13 June). The investment banker is accused of having taken advantage of the Libyan Investment Authority's limited experience and forced it into risky and, what has turned out to be loss making, derivative trades.
The fund's lawyer, Roger Masefield QC, told the High Court in London that the bank had made "eye-watering profits" by taking advantage of the LIA's vulnerability on nine disputed "jumbo" derivative trades. The fund is claiming that while Goldman Sachs raked in more than $200m (£141m, €177m) in profits from the LIA in just four months in 2008, the fund lost its entire $1.2bn (£0.85bn, €1.06bn) investment.
Masefield told the High Court that email exchanges and documents show that Goldman was aware of LIA's "lack of sophistication" and in one email by Goldman's Driss Ben-Brahim, he referred to the LIA as having "zero level sophistication." A Goldman Vice President Laurent Lalou described the investment bank's presentation to the fund's team as a pitch "to someone who lives in the middle of the desert with his camels ..."
Goldman has denied all the allegations and any wrongdoing. It says that there was nothing unusual about the trades undertaken, the Financial Times reports.
The High Court was also told how the bank's sales employee, Youssef Kabbaj was "embedded within the LIA" in 2007 in a bid to make Goldman "almost an in-house bank," the Financial Times reported. It said that Kabbaj took Haitem Zarti, the younger brother of senior LIA executive Mustafa Zarti on a holiday to Morocco on his own expense.
He also took Haitem Zarti to a Goldman conference in Dubai. His business flights, and 5-star hotel accommodation were all paid for by Goldman. Masefield also told the court that Kabbaj had additionally arranged for two prostitutes to spend the evening with them in Dubai at a cost of $600.
After all that, Haitem Zarti was also given an internship at Goldman, the court was told. The high-level dealings between the bank and LIA, also saw a meeting take place in July 2007 between Ben-Brahim and Saif Gaddafi, the son of Libya's former leader Colonel Gaddafi aboard his yacht in Cannes.
Goldman Sachs says LIA claims 'unusual and ambitious'
Goldman Sachs, however, in its written opening arguments, described the claims made by LIA as "both unusual and ambitious" and said that they lacked documents and key witnesses. It claimed that LIA did not take any legal action until 2014, well after the trades had matured and the LIA knew that they were making a loss.
The bank said that LIA had also entered into complex and large transactions with other financial institutions other than Goldman Sacks. It says that LIA "was the victim of an unforeseen financial depression, not of any wrongdoing by GSI [Goldman Sachs International]."