Oiling the wheels! Goldman Sachs faces lawsuit for allegedly duping Colonel Gadaffi’s officials


A fool and his money are soon parted, so says the well worn adage.

In oil-rich North Africa, the Libyan Investment Authority brings this to mind once again in the form of a claim that global investment bank Goldman Sachs abused the financial illiteracy of Libyan officials during Colonel Gadaffi’s regime in order to attract investment of almost £800 million.

As a result of this claim, Libya’s vast sovereign wealth fund which was established in 2006 in order to invest oil revenues after sanctions on the nation were lifted, has commenced a High Court battle in Britain against Goldman Sachs, alleging that Libyan officials were provided with luxurious parties, girls and luxury trips in order to encourage them to invest a sum close to £800 million with the bank.

The investments were linked to companies whose share prices have diminished, including Citigroup and French energy conglomerate EDF, thus proving a disaster for the Gadaffi regime, creating losses of £660 million, whilst Goldman Sachs profited by over £200 million.

According to a report today by the Daily Mail, Goldman Sachs has faced embarrassing accusations from one witness for the LIA, Catherine McDougall, an Australian lawyer who advised the fund at the time.

She alleged that Goldman, spearheaded by former executive Youssef Kabbaj, courted financially illiterate LIA officials by taking them to expensive clubs in London and on a ‘lavish trip to Morocco’ that included ‘heavy drinking and girls.’

In one email exchange, Mr Kabbaj – who left Goldman in 2009 – told an LIA employee to ‘divorce your wife for the weekend’. Goldman has denied any wrongdoing.

It will say that following an ‘extensive review of expenses related to LIA’, the total amount claimed by Youssef Kabbaj in 2007 and 2008 was around £50,000.

It said most lunches were either in Goldman Sachs canteens or in ‘standard business restaurants’ generally charging $100 a head.

London is considered the capital of global investment by high rollers from the Arabian peninsula and oil-rich parts of North Africa and has very close connections with the Arab League nations, thus many high net worth investors from the region own real estate portfolios and have substantial investments within British private banks. Indeed, the Gadaffi family, along with Syria’s Assad family, all own several properties in London.

In October last year, Prime Minister David Cameron demonstrated his wish to attract wealth from the Middle East by declaring ““For years people have been talking about creating an Islamic bond — or sukuk — outside the Islamic world, but it’s never quite happened.”

Mr. Cameron continued that “Changing that is a question of pragmatism and political will. And here in Britain we have got both. This government wants Britain to become the first sovereign outside the Islamic world to issue an Islamic bond.”

In conducting this, Mr. Cameron expected an influx of $200 billion into British electronic trading and investment markets, in particular the London Stock Exchange, from the Middle East.

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Oiling the wheels! Goldman Sachs faces lawsuit for allegedly duping Colonel Gadaffi's officials

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