Goldman Sachs was like a ‘swarm’ on Libyan wealth fund client, court told

Fesus Robert/Shutterstock

Goldman Sachs acted “like a swarm” on a Libyan sovereign wealth fund client, a witness in a dispute between the bank and the Libyan Investment Authority, told a London court on Thursday.

The bank presented different teams and products to the LIA in 2007 “one after the other and almost relentlessly,” Ali Jallal Baruni, a consultant for the LIA, said in a witness statement distributed to journalists.

Baruni claimed Goldman Sachs even introduced the son of Sir Martin Sorrell, CEO of advertising giant WPP, as part of the team.

“I felt almost under attack as different Goldman Sachs teams and products were presented to me, one after the other and almost relentlessly, without me even being given the opportunity to ask questions or reflect on them,” Baruni said in the statement.

“I believe I told the Goldman Sachs representatives (who included Mr Lalou, Mr Murgian and someone who was introduced to me as the son of Martin Sorrell (the well-known CEO of WPP plc), as well as others that I felt inundated by the experience,” he said in the statement made earlier this year and referred to in court on Thursday.

“If I felt like that, with my experience, I cannot imagine what much younger and less experienced LIA employees would have thought,” he said.

Baruni said that LIA staff were “snowed” and “very impressed” by hospitality laid on by the bank, which included flights on private jets.

The Libyan Investment Authority is claiming it lost more than $1 billion (£750 million) on nine trades executed by Goldman Sachs in 2008 on banks such as Citigroup and UniCredit, as well as the French company EDF.

The bank made more than $200 million in profit on the trades, exploiting the LIA’s relative financial naivety, according to the LIA’s lawyers.

Goldman Sachs has said it would defend against the claims “vigorously,” calling them “without merit.”

Goldman Sachs sign is seen above floor of the New York Stock Exchange shortly after the opening bell in the Manhattan borough of New YorkThomson Reuters

Baruni was cross-examined in court byRobert Miles, a lawyer for Goldman Sachs and challenged on his assertion that senior members of the LIA were “very unsophisticated” in finance and investment.

Miles took Baruni through the work experience of Mohammed Layas, the executive director of the LIA. Baruni called Layas “very unsophisticated in investment,” in his statement. “So far as I was aware, he had zero experience, understanding or sophistication when it came to derivative products,” Baruni said.

Layas held senior positions in international bank, Miles said, and that Baruni’s evidence was skewed by his bias towards helping LIA win the court dispute, rather than a real assessment of Layas’s financial experience.

“In the light of all this, do you still wish to maintain that he was financially illiterate? You have no basis for that, it is pure advocacy,” Miles said.

The court heard on Tuesday that Goldman Sachs became close to the LIA after Kabbaj, a former Goldman Sachs sales employee, was embedded within the organisation in 2007. Kabbaj befriended Haitem Zarti, the younger brother of a senior LIA official.

Zarti was taken on holiday to Morocco and to a conference Dubai, where Kabbaj allegedly paid for business-class flights and five-star hotel rooms and, according to the LIA lawyers, procured prostitutes for them both. Zarti was also granted a coveted internship at the bank.

The court heard claims that Kabbaj exchanged texts with a prostitute, known as Michella, to organise entertainment for him and Zarti in Dubai in February 2008, according to LIA’s lawyers.

The LIA was set up in 2006 to invest Libya’s oil wealth internationally. The organisation claimed Goldman Sachs took advantage of the low level of financial literacy of LIA staff and suggested large and risky trades that led to heavy losses for it and profits for the bank.

Lawyers for Goldman Sachs, responding to the claims on Tuesday, said that the LIA was suffering from “buyers remorse,” according to a report by Bloomberg News, and that the bank wasn’t responsible for the losses, which happened amid the 2008 credit crunch and financial crisis.

The trial is scheduled to last for seven weeks.