Goldman Sachs Group took advantage of the “naive and unsophisticated” Libyan Investment Authority (LIA) to influence officials to place trades that caused the fund to lose about US$1.2 billion, lawyers for the fund said at the start of a highly anticipated trial in London.
One Goldman partner said the LIA was “very unsophisticated” in a 2008 email disclosed for the trial that started Monday. Another note from a bank vice president said “you just delivered a pitch on structured leveraged loans to someone who lives in the middle of the desert with his camels”, according to documents disclosed for the trial. The attitude is symptomatic of the investment bank’s dealings with the fund, Roger Masefield, the LIA’s lawyer, said in court.
The $60bn Libyan fund’s case against Goldman is that the bank exploited its close relationship with LIA employees to sell inappropriately risky investments. That relationship broke down in 2008 when derivatives linked to bank stocks turned against the LIA.
The LIA’s claim is “both unusual and ambitious”, Goldman’s lawyers said in court documents prepared for trial. The fund chose the underlying stocks with its own research conducted over a matter of months, they said.
“The credit crisis and its impact on global markets turned out to be far more prolonged than the LIA and the great majority of market participants had anticipated,” the bank’s lawyers said. “The LIA was the victim of an unforeseen financial depression, not of any wrongdoing by” Goldman Sachs.
A dispute between rival factions over who now controls the LIA led a UK judge to appoint independent “receivers” to manage the litigation. The LIA is also suing Société Générale over investment losses.
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