Goldman Sachs’ Vella Says Bank’s Critics Aren’t Being Honest

  • Vella dismisses comments in ‘Why I Left Goldman Sachs’ book
  • Bank executive testifies in $1 billion Libya fund lawsuit

Goldman Sachs Group Inc. executive Andrea Vella told a London court that former colleagues who criticized the bank, including the author of a book alleging it mistreated clients, were being dishonest because they wanted to make money.

Testifying in a $1 billion trial between Goldman Sachs and Libya’s sovereign wealth fund, Vella dismissed comments from two former employees that cast the bank in a negative light. Vella, co-head of Asia investment banking, was shown a chapter of Greg Smith’s book “Why I Left Goldman Sachs” about hunting elephants, a reference to the relentless pursuit of very large trades.

“He may have compromised his honesty for writing or selling a book,” Vella said, explaining that he disagreed with Smith’s account.

The $60 billion fund, the Libyan Investment Authority, set up under former ruler Moammar Qaddafi to manage the African nation’s oil wealth, is suing Goldman Sachs and, in a separate suit, Societe Generale SA, to recover losses from investment deals dating back to the market collapse of 2008.

Smith’s “book was about as accurate as it was popular,” a Goldman Sachs spokesman said in a statement. A spokesman for the LIA’s lawyers didn’t immediately respond to an e-mail seeking comment.

Vella was also shown a 2011 letter written to Goldman Sachs by lawyers for a former banker, Mohamed Bani, in which he raised concerns about the LIA deals. Vella said that it made him doubt Bani’s honesty.

‘Looking for Money’

“He was looking for money from Goldman Sachs,” Vella told the court. Both Bani and Smith “are writing things that are inaccurate,” he said. “They have an agenda.” Bani was told in 2011 not to return to his job in the emerging markets structuring team.

Several LIA officials have testified in the trial that they didn’t fully understand the derivatives sold by Goldman Sachs. One said he had never heard of the New York bank before meeting its employees. Goldman Sachs argues that the LIA knew enough to appreciate the risks of investing and the fund’s executives were angry because they lost money, not because of mistreatment.

Bani’s lawyer at Withers didn’t immediately respond to an e-mail seeking comment. The publisher of Smith’s book didn’t immediately respond to an e-mail seeking comment outside of normal working hours, and a phone number he used was no longer connected.

‘Total Joke’

The letter sent by Bani’s lawyers, used by the LIA to support its case, makes a number of allegations against Goldman Sachs, including that a trader at the bank had called its LIA transactions a “total joke” because the fund didn’t understand anything. Vella said he wasn’t aware of the comments and denied the letter’s claim that Goldman made excessive profits from the deals. The letter also alleged that Libyans had asked a Goldman banker for a bribe.

“I think he may have misconstrued, misrepresented things,” Vella said.

Vella also denied getting so angry with Youssef Kabbaj, the Goldman banker then closest to the LIA, that he once took off his shoe and banged it on the table.

“Do you say ‘the Italian shoe incident,’ as it is referred to elsewhere, never happened?” LIA lawyer Philip Edey asked.

‘Shoe Risk’

“I really don’t remember that happening,” Vella said. Kabbaj, who has since left Goldman Sachs, referred to it in a letter he sent to the bank cited by the LIA. The letter alleged that Vella became angry after Kabbaj complained to senior Goldman executives about him. Edey later read out a text sent by Kabbaj to Vella asking if he could call an LIA executive “without taking the Italian shoe risk.”

“I don’t know what he is referring to,” Vella said. He explained that Kabbaj was trying to put pressure on the bank after his position was put in doubt by saying “a lot of bad things were done.”

Vella’s impression was that the Libyan executives were “financially sophisticated” and experienced enough to understand what they were doing, according to a written statement he filed in the case.

The LIA has claimed that Goldman Sachs gave an internship to a Libyan executive’s brother to entice the fund into signing deals. Vella said the internship was part of an effort to train future LIA leaders and “it was not unusual at the time to give training to employees of clients,” according to his statement. He said he didn’t think it influenced any of the deals.

Seeking Goodwill

“It is common for firms to seek to cultivate and generate goodwill with potential counterparties in the hope (rather than expectation) that a closer relationship will lead to more potential business opportunities,” Vella, who previously worked at JPMorgan Chase & Co., said in the statement.

The LIA’s lawyers have alleged that Goldman bankers bought gifts, arranged trips abroad and hired prostitutes for Libyans with connections to the fund. The bank denies any wrongdoing.

The power vacuum left by Qaddafi’s 2011 death plunged Libya into violent conflict and destroyed its economy. A unity government has gained support from the main factions and restarted oil exports, however control of the Libyan Investment Authority remains disputed.

The case is Libyan Investment Authority v. Goldman Sachs International, HC-2014-000197, High Court of Justice, Chancery Division.

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