The Moroccan booze cruise with a $1bn hangover: Libya 'taken for a ride' by Goldman Sachs

Goldman Sachs allegedly wined, dined and sold the Libyan Investment Authority risky investments.

by Rachel Savage
Last Updated: 07 Oct 2014

Bankers treating clients to a ‘lavish’ weekend in Morocco, with ‘heavy drinking and girls involved’, and then persuading them to invest in products they don’t really understand that lose them a whole lot of money - it all sounds very Wolf of Wall Street.

But that is exactly what the Libyan Investment Authority is accusing Goldman Sachs of. It claimed the bank took advantage of the Libyans’ financial inexperience to flog them $1bn (£623m) of risky investments in 2008, which turned out to be ‘worthless’ by 2011.

Goldman Sachs made profits of $350m from the nine transactions in question, the $66bn sovereign wealth fund alleged in a pre-trial hearing in the UK’s High Court on Monday.

The investment bank has denied the allegations, claiming the investments ‘turned out badly because of the market collapse in 2008’ and that the LIA was suffering from ‘buyer’s remorse’.

LIA, in turn, has said its staff were ‘taken for a complete ride’ by Youssef Kabbaj, who was head of the bank in north Africa, but no longer works for them. They ‘completely trusted Goldman and thought Mr Kabbaj was their very close friend,’ said Australian lawyer Catherine McDougall, who was seconded from city law firm Allen & Overy to the LIA at the time, in a statement.

She said she had been told about the ‘lavish trip to Morocco’ and ‘expensive nights out’ in London, both of which were mostly paid for by Kabbaj on his company credit card.

McDougall’s statement was corroborated by testimony from Sofia Wellesley, who also worked for the LIA at the time and is now head of client relations for Cherie Blair’s law firm. The Libyans were ‘a team of clearly naive and unqualified individuals... doing their best in the face of extremely intelligent, ambitious and experienced individuals,’ Wellesley, the Duke of Wellington’s granddaughter and James Blunt’s wife, alleged.

Goldman, on the other hand, claims the LIA staff were far from being financially incompetent, having had ‘long careers in banking’. The trades in question ‘were not difficult to understand’ and the bank wanted to build a long-term relationship with the Libyans (little chance of that now...), so had no incentive to rip them off, it said.

The case isn’t expected to start properly until next year, so the allegations are likely to continue being traded for a while yet. Get your popcorn out…

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