Goldman Sachs rejects claims of lavish parties for Libya clients

The bank is fighting a legal action from the post-revolution sovereign wealth fund, the Libyan Investment Authority

(AFP/Getty)

Goldman Sachs is retaliating against explosive High Court claims that it coerced officials in Gaddafi-era Libya to invest more than $1bn of the impoverished country’s money with it by laying on lavish parties with “heavy drinking and girls”.

The bank is fighting a legal action from the post-revolution sovereign wealth fund, the Libyan Investment Authority, which alleges that Goldman got too close to the organisation’s naïve officials and hoodwinked them into making $1.2bn (£790m) of derivatives trades they failed to understand. The deals went bad and Libya lost all the money.

The LIA case highlights such events as freebie trips to Morocco and London, a highly prized internship for an official’s relative and other corporate hospitality.

But Goldman is about to file evidence claiming to show its senior banker in charge of the Libyan business – Youssef Kabbaj – spent only £50,000 between 2007 and 2008 on expenses surrounding the LIA contract. Two thirds of that was for financial training, which the bank also provides for other clients, Goldman’s evidence will claim.

While it will confirm Mr Kabbaj accompanied the LIA officials to countries including Morocco, it will claim he only took them to a handful of dinners during two business trips to the country, at respectable restaurants.

Goldman will also claim the bank only paid for LIA officials to stay in relatively standard hotels in London during their visits here. The bulk of lunches were held at the Goldman canteen, as opposed to Michelin-starred restaurants. External dinners that were laid on were generally not in excess of the bank’s $100 a head maximum, they claim. Goldman’s evidence is thought to be largely based around Mr Kabbaj’s company credit card records.

They appear to dispute evidence from a key LIA witness – the Allen & Overy lawyer Catherine McDougall, who was seconded to the LIA and uncovered Goldman’s alleged misbehaviour.

Her witness statement highlights how she was “shocked” at the inappropriately close bonds forged between Goldman and the Libyans. She testified: “They told me about their lavish trip to Morocco and that there was heavy drinking and girls involved and that the trip was paid for by Youssef Kabbaj mostly on his corporate credit card.”

Ms McDougall has also testified that LIA staff told her how Mr Kabbaj “would take them out in London for expensive nights out, again paid for on his Goldman Sachs credit card”.

Goldman declined to comment. The LIA said in a statement: “The LIA look forward to receiving full and proper disclosure by Goldman Sachs.”