Goldman Sachs ‘paid for escorts and parties to win £800m Libya cash’
GOLDMAN Sachs hoodwinked officials in Colonel Gaddafi’s regime into an £ 800million investment by plying them with prostitutes and lavish parties, a court heard yesterday.
Brokers paid for high- class escorts, business travel, five- star hotels and tickets to a Rugby World Cup game in a bid to win business, it was claimed.
Details of the extravagant hospitality emerged on the first day of a High Court battle that will examine the Wall Street bank’s dealings with Libya’s £46billion sovereign wealth fund.
The Libyan Investment Authority (LIA) was set up in 2006 to invest the country’s oil riches after economic sanctions were lifted.
The society wife of pop star James Blunt is set to be called as a witness in the court case. Sofia Wellesley – a descendant of the Duke of Wellington – worked as a personal assistant to Mustafa Zarti, the LIA’s former deputy chief, at offices in Mayfair, London.
On day one of the legal battle, the court was told the bank exploited the financial naivety and trust of Gaddafiera officials into putting money into complex investments during the financial crisis. Goldman – the world’s most powerful investment bank – allegedly wrongly took advantage of trusting officials at the wealth fund to persuade them to invest £846million with the bank between January and April 2008, most of which it lost.
Investments were linked to companies whose share price crashed, including US bank Citigroup and French energy giant EDF. Meanwhile, Goldman allegedly raked in ‘eyewatering’ profits of more than £200million for the trades.
Roger Masefield QC, representing the LIA, said the Wall Street giant courted financially illiterate officials to lure them into making the complicated investments. One Gaddafi official, on discovering the vast losses, described Goldman as the ‘bank of mafiosa’, he said. Mr Masefield told the court the deal was spearheaded by ex-Goldman executive Youssef Kabbaj. He said the Moroccan-born banker was given the instructions: ‘Stay a lot in Tripoli. It is important you stay super close to clients on a daily basis. Teach them, train them, dine them.’
Goldman agreed a £36,000 internship for Haitem Zarti, the brother of Mustafa Zarti, which the LIA claims was intended to influence decisions by the investment fund.
Papers handed to the court by LIA state: ‘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 trip Mr Kabbaj went so far as to arrange for a pair of prostitutes to entertain them both one evening.’
Goldman also took groups of young LIA staffers on luxurious breaks to Morocco and Dubai which were ‘on the very fringes of acceptable corporate hospitality’, court papers said.
LIA’s outline argument to the court added: ‘When all of that and additional trips were also offered to Haitem Zarti on an allexpenses- paid basis, together with the procurement of prostitutes and the tailor-made and highly coveted Goldman Sachs internship, they clearly were a step too far.’
Emails released by the LIA in its evidence cited Goldman Sachs describing the sovereign wealth fund as having ‘zero-level’ financial sophistication. One broker was said to have delivered a pitch on a complex financial deal ‘ to someone who lives in the middle of the desert with his camels’.
Miss Wellesley was quoted in court documents as saying LIA staff were ‘a team of clearly naive and unqualified individuals... doing their best in the face of extremely intelligent, ambitious and experienced individuals’.
Mr Kabbaj is not being called to give evidence for Goldman. The court was read a settlement agreement stating the banker had received a £3.1million payout to stop concerns about the trades being aired.
The LIA argues the case is one of ‘abuse of trust, undue influence and unconscionable bargain’. It added: ‘It most emphatically is not, therefore, as Goldman Sachs would have it, one of little more than “buyer’s remorse”.’
Goldman is disputing the claim, which was filed in 2014. It said it did not believe the internship influenced the LIA’s decision to enter into the trades. The investments were done with full understanding and knowledge of the wealth fund’s senior staff.
Goldman, whose lawyers will address the court today, said: ‘The claims are without merit and we will continue to defend them vigorously.’
‘Clearly a step too far’