Extent of the Libyan Investment Authority’s Claim Against Goldman Sachs Detailed
Ultimately worthless trades of $1billion netted Goldman Sachs $350 million
Leading US investment bank built an unusually close working relationship with newly formed institution in last years of Gaddafi-era Libya
30 January 2014, London
The full extent of the Libyan Investment Authority’s (LIA) case against Goldman Sachs was detailed today, with the serving of the legal claim and its particulars on Goldman Sachs. This follows the submission by the LIA at the High Court in London last week.
The claim rests on disputed equity derivatives trades, amounting to in excess of $1 billion. These trades expired as worthless in 2011 despite delivering immediate and disproportionate profits to Goldman Sachs, estimated to be in the range of $350 million.
The central charge is that Goldman Sachs deliberately exploited the relationship of trust and confidence it had established with the LIA to cause the LIA to enter into each of the disputed trades.
The legal papers submitted by the LIA note the huge imbalance between Goldman’s sophisticated financial expertise and the LIA’s extremely limited in-house financial and legal experience; the LIA being a newly formed sovereign wealth fund that became operational during the last years of Gaddafi-era Libya.
From late 2007 onwards until after the disputed trades took place, Goldman Sachs employees were extensively involved in self-described training and development of the team at the LIA, had unfettered access to its offices, systems and information, and provided extensive corporate hospitality for LIA employees.
The legal papers also note that the exploitative trades were inadequately documented by Goldman Sachs, with the details of the actual trades undertaken being provided to the LIA weeks (and in some cases months) after the trades were executed. When the LIA received these and began to understand the true nature of the disputed trades it became clear that the trust and confidence placed in Goldman Sachs had been abused.
Mr AbdulMagid Breish, Chairman of the LIA since June 2013, said:
“The unique circumstances allowed Goldman Sachs to take advantage of the LIA’s extremely limited financial and legal experience, to deliberately exploit its position of influence, and to take advantage in a way that generated colossal losses for the LIA but substantial profits for Goldman Sachs.
While Goldman Sachs was orchestrating these unjustly exploitative transactions, it repeatedly told the LIA that it sought a long-term relationship with the LIA as a strategic partner. This was untrue.
Today, the LIA, as the sovereign wealth fund of Libya, is seeking the recovery of these substantial funds as it seeks to invest and generate wealth for the people of Libya as the country continues its development following the revolution of 2011.”
Goldman Sachs has 14 days to acknowledge service of the legal proceedings.
About the LIA
The Libyan Investment Authority (LIA), established in 2006, is a sovereign wealth fund, headquartered in Tripoli, Libya. The LIA’s estimated current assets stand at approximately US$60 billion, of which approximately 50% are investments in over 550 companies held in various funds and portfolios.
Following the change of regime in 2011, the LIA has been undergoing a period of reform and a strategy and asset review process that is nearing completion. Existing and previous investments are being reviewed, whilst a new investment strategy will be launched in Q1 2014.
The LIA’s focus is on promoting economic stability, supporting diversification and wealth creation for current and future generations, and investment in key
Libyan infrastructure projects.