Goldman Sachs wins $1bn Libya Investment fund lawsuit

Goldman Sachs has won a $1bn lawsuit brought against it by the Libyan Investment Authority (LIA) in a high profile legal case.

A High Court judge said on Friday that she had dismissed the LIA’s case that the wealth fund was subject to undue influence by Goldman Sachs by entering into nine disputed trades.

The ruling comes after a hard fought High Court trial in which it was claimed Goldman exploited the LIA’s limited financial experience and in which the court heard details of Goldman bankers trying to get close to LIA officials to win lucrative business from the sovereign wealth fund by offering lavish corporate hospitality – and in one case procuring prostitutes.

The LIA case revolved around claims that it was a fledging wealth fund and was forced by Goldman into risky derivative trades in which the US bank made $200m in profits but the LIA lost its entire $1.2bn investment.

The bank denied this and claimed the LIA was suffering from a classic case of “buyer’s remorse”.

The wealth fund focused on the activities of an ambitious Goldman banker and would-be rainmaker named Youssef Kabbaj and his attempt to cement Goldman’s relationship with the Libyan sovereign wealth fund which had been set up by Colonel Gadaffi with $65bn of assets.

The LIA claimed in court that Mr Kabbaj procured prostitutes and that Goldman paid for staff from the LIA to stay in five-star London hotels as well as offering them tickets to Champions League football games and to musical productions of Chicago and Lord of the Rings.

The LIA also claimed Mr Kabbaj “crossed the line” in deliberately blurring “professional and personal relationships” in locations ranging from Tripoli and Dubai.

It heard claims that Haitem Zarti, the brother of an LIA executive who previously run nothing more substantial than a video club, was flown business class to Dubai and out up at the five star Ritz Carlton hotel in Dubai to attend a Goldman conference and he was later offered a prestigious 11-month internship at Goldman in the bank’s hope that he would one day become an important LIA official, the court heard in the trial.

Mrs Justice Rose ruled that an internship offered to Haitem Zarti by Goldman was done so in the belief that he would occupy a senior position in the LIA and that the internship did not influence the LIA into entering the disputed trades.

She found that Goldman did not exercise undue influence on the LIA and the wealth fund had their own reasons for doing the deals. Goldman did not make “excessive” profits on the deals, she added.

The LIA said in a statement:

The Libyan Investment Authority is naturally disappointed with the judgment handed down today by Mrs Justice Rose. Time will be needed fully to digest the judgment and all options are being considered at this time.

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