Goldman Sachs, the pillar of honesty and integrity is fighting in court to keep the Libyan Investment Authority (LIA) from clawing back $1.2 billion the LIA says was lost through nine disputed trades conducted in 2008.
The LIA, Libya's $67 billion national investment fund, is saying that Goldman gained its trust and then abused it by encouraging it to participate in complex trades that it did not understand.
"The disputed trades were inherently unsuitable for a nascent sovereign wealth fund such as the LIA and Goldman Sachs knew (or at the very least suspected) that the LIA did not properly understand the trades, which were highly structured, complex, and risky" a document submitted to the court said according to the BBC.
You don't say, Goldman earned someone's trust and then dumped a bunch of bad trades on the client right as the financial crisis was beginning? Unpossible.
Roger Masefield, a AQC for the LIA says the trades were executed between January and April 2008, and when the losses emerged, Masefield said one Libyan official described Goldman as the "bank of mafioso." The trades were on banking companies Citigroup, Santander and UniCredit, French electricity company EDF, utility ENI and German Insurer Allianz according to The Guardian.
And as The Guardian reports, while the LIA lost nearly all of its investment, Goldman generated more than $200 million from the trades according to Mansfield.
How exactly did Goldman gain the LIA's trust? Why by resorting to the vampire squid handbook of course, prostitutes and five star accommodations, courtesy of your friendly Goldman banker. Masefield told the court that one former Goldman executive named Youseff Kabbaj had been told to "stay a lot in Tripoli. It is important you stay super close to clients on a daily basis. Teach them, train them, dine them." - oh they were "dined" that's for sure.
As The Guardian explains
According to the skeleton argument presented to the court by the LIA: “Mr Kabbaj took Haitem Zarti on holidays to Morocco on various occasions. Mr Kabbaj also took him to Dubai for a conference, with the business class flights and five-star accommodation being paid by Goldman Sachs. Documents disclosed by Goldman Sachs show that during that drip Mr Kabbaj went so far as to arrange for a pair of prostitutes to entertain them both one evening.”
Oh, and don't forget the paid internship for Haitem Zerti, the brother of the LIA's former deputy chief - but that was based on merit we're sure.
Masefield says that Goldman had given Kabbaj a $4.5 million bonus for not airing concerns about the trades.
The LIA argued that the case was one of "abuse of trust, undue influence and unconscionable bargain", adding “It most emphatically is not, therefore, as Goldman Sachs would have it, one of little more than ‘buyer’s remorse’; of a counterparty who like many others lost money as a result of the market crash in 2008 and now wants to rewind the clock.”
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Learning of Goldman's epic tales of unethical behavior and shady dealings never gets old. Someday, however, we suspect that clients will eventually get tired of being abused by the firm - but we aren't holding our breath.