Goldman Sachs Group Inc. made about $350 million on “worthless” derivatives trades after exerting “undue influence” on managers of the Libyan Investment Authority, according to the sovereign-wealth fund, the second-largest in Africa.
LIA sued Goldman Sachs on Jan. 21 in London over investments of about $1 billion made in 2008. The fund said in court documents released today that its executives, who were given gifts of chocolate and after-shave by the bank, never understood the transactions.
“The unique circumstances allowed Goldman Sachs to take advantage of the LIA’s extremely limited financial and legal experience to deliberately exploit its position of influence and to take advantage in a way that generated colossal losses for the LIA but substantial profits for Goldman Sachs,” LIA Chairman AbdulMagid Breish said in an e-mailed statement.
Libya’s sovereign wealth fund built up assets of about $60 billion under Muammar Qaddafi, who was deposed and killed in a 2011 coup. The LIA lost about $1.75 billion betting on structured products in 2007 and 2008, about $900 million of which was with Goldman Sachs, its former chairman, Mohsen Derregia, said in June 2012.
Staff at the New York-based bank offered to train LIA employees at its London offices, took them on a trip to Morocco and bought them gifts to build a relationship, the fund said in the court filing. The 2008 derivatives were linked to shares in Citigroup Inc., Electricite de France and Banco Santander SA.
“We think the claims are without merit, and will defend them,” said Fiona Laffan, a Goldman Sachs spokeswoman in London.
The LIA didn’t specify any amount in damages. It’s “seeking the recovery of these substantial funds as it seeks to invest and generate wealth for the people of Libya as the country continues its development following the revolution of 2011,” Breish said in the statement.
Libya has the 20th largest sovereign wealth fund in the world, according to the Sovereign Wealth Fund Institute.
The case is The Libyan Investment Authority v. Goldman Sachs International, case no. 14-310, High Court of Justice, Chancery Division.