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Libya accuses Goldman Sachs of $222 Million in Fraud in London Court


(Author: Libyan Gazette Editorial Staff)

The Libyan Investment Authority (LIA) is suing Goldman Sachs for $1.2 billion.

The LIA is claiming that Goldman knowingly manipulated them into trades that would not yield benefit for the LIA form nine trades that took place in 2008.

The LIA said Goldman made a profit of around $222 million as a result of the trades that brought no benefit to the LIA.

The case is being heard at London’s High Court.  

On Tuesday the LIA called on Catherine McDougall, the last witness to testify for the LIA. McDougall is a former lawyer with Allen & Overy and was assigned in July 2008 to offer guidance and support to the legal team representing the LIA.

McDougall recounted that the LIA seemed to not have a clue about the investment they made with Goldman.

In July 2008 upon arrival to Tripoli McDougall realized “There was a sea of confusion at the LIA, which ranged from an understanding that they had purchased shares, quasi-shares or shares with deferred payment,” McDougall explains.

“I was really surprised as it did not take rocket science to realize that the product was completely synthetic,” she adds. “There were no shares involved.”

McDougall says she shared her observations with both the LIA and Goldman and also raised the matter with her firm.

When McDougall asked a representative of the LIA to explain the due diligence done before they authorized the trades back in 2008 the representative replies with “Due what?”

McDougall believes  “Goldman Sachs had unfairly taken advantage of the LIA’s lack of sophistication … and sold the LIA $1 billion worth of derivatives products the LIA could not understand”.

Youssef Kabbaj, the Goldman representative in the trades, was highly trusted by the LIA. Since the LIA was clueless to how investment banking worked Kabbaj was revered for his knowledge and expertise.

McDougall says she thinks the LIA “didn’t understand how much Mr Kabbaj stood to gain personally from his relationship with them. They were … very effusive and very welcoming and they trusted people. They thought he was their friend.”

“They did not understand how Goldman Sachs staff would personally benefit from these trades through bonuses and promotions,” said McDougall.

To counter McDougall’s statement Robert Miles, one of the lawyers representing Goldman, argued that the LIA is trying to “shift the blame” by overstating its lack of understanding.

Goldman had Kabbaj sign a confidentiality agreement though he is currently not employed at Goldman.

Goldman has denied the claims made by McDougall stating that the the relationship it had with the LIA was strictly business related.

On Thursday the defence will make its case in court.

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