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 Goldman Sachs sued for $1bn by Libyan fund

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PostSubject: Goldman Sachs sued for $1bn by Libyan fund   Fri 31 Jan 2014, 7:57 pm

Libya's sovereign wealth fund sues over claims investment bank exploited lack of financial expertise at Gaddafi fund

Libya's sovereign wealth fund is suing Goldman Sachs for more than $1bn (£600m) over allegations that the investment bank exploited a lack of financial expertise at Colonel Gaddafi's investment fund.

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In papers filed in London's high court, the Libyan Investment Authority (LIA) said Goldman charged it $1.1bn for a series of complex derivative trades in the run-up to the financial crisis of 2008, which it claimed eventually proved worthless. Even so, the bank is estimated to have reaped profits on the transactions of around $350m, the legal papers alleged.

The case promises to provide an intriguing insight into how major banks scrambled to get their hands on Libya's wealth after the United Nations voted to lift sanctions on the country in 2003, a battle that continued until the reintroduction of the trading ban in 2011.

The LIA has claimed it opened its relationship with Goldman in mid-2007 by handing it $500m, before quickly making two subsequent deposits of $150m and $200m for the bank to invest on its behalf, as well as other payments. It added that as part of "this 'partnership', Goldman said that it would train the LIA employees and senior management in relation to financial markets and products, and said it would also offer the LIA long-term strategic investment advice".

However, when a solicitor on secondment to the LIA was handed a record of the trades Goldman had been conducting on the Libyans' behalf, she explained that its funds were being used to invest in "highly speculative gambles" where the "interests of the LIA and Goldman were not aligned, and cautioned that the LIA had placed too much trust and confidence in Goldman".

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The investment bank's executive director in charge of Libyan investments, Youssef Kabbaj, was summoned to the LIA's office to explain, only for the meeting to come to an abrupt conclusion when the banker was thrown out of the building by LIA director, Mustafa Mohamed Zarti.

Goldman reportedly offered to make Libya one of its biggest investors as compensation for losing practically all the funds the LIA entrusted to it.

A spokeswoman for Goldman Sachs said: "We think the claims are without merit, and will defend them vigorously."
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