Goldman Says Libya Suffering From Buyers Remorse Over Bad Trades

  • Lawyer says LIA a victim of credit crisis, not bank wrongdoing
  • Text messages from Goldman banker shown to judge by lawyers

The Libyan Investment Authority is using Goldman Sachs Group Inc. as a scapegoat to recover more than $1 billion the sovereign-wealth fund lost during a period when global markets were seizing in the 2008 credit crunch, the investment bank’s lawyer said.

Robert Miles, Goldman Sachs’ lawyer, made his opening arguments to the London court a day after the multi-billion dollar sovereign-wealth fund said the New York-bank used vacations and prostitutes to push unsophisticated Libyan officials into risky bets before the global financial crisis.

"This really is a case of buyer’s remorse," Miles said Tuesday. The LIA “lost because its assessment of the stock market was optimistic.”

The trial, which started Monday, is the culmination of years of legal maneuvering played out against the backdrop of the financial crisis and then the overthrow of Libyan dictator Muammar Qaddafi. Fighting between the two sides in the country’s civil war for control of separate lawsuits against Goldman Sachs and Societe Generale SA delayed the start of the London proceedings for months.

Text Messages

Before Miles started the bank’s case Tuesday afternoon, lawyers for the fund continued to show the judge documents that they said proved how Goldman Sachs tried to manipulate fund officials.

Goldman Sachs "embedded" an employee within the LIA to foster an "exceptionally close" relationship with the fund, the lawyers said. The banker, Youssef Kabbaj, took employees on holidays to Morocco and lavish business trips to London and Dubai.

Kabbaj paid for two prostitutes for himself and a fund executive’s brother on one visit to the United Arab Emirates, according a series of text messages referred to in court by lawyers and distributed to reporters by a spokeswoman for the LIA.

"Hi darling, do you remember me? Yousef from london. Just arrived in dubai. Available tonight, with a friend?" Kabbaj said in one 2008 message.

Kabbaj said that the allegations were baseless. 

"Goldman Sachs or myself never paid for any LIA employee any improper entertainment," Kabbaj said in an e-mail Monday. Officials for the bank declined to comment Tuesday.

The case is The Libyan Investment Authority v. Goldman Sachs International, case no. HC-2014-000197, High Court of Justice, Chancery Division.

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