Goldman Sachs Accused of Hiring Prostitutes to Win Libyan Business

On Monday, a lawyer for the Libyan Investment Authority told a British judge that employees of Goldman Sachs Group Inc. (NYSE: GS), attempt to win the $60 billion oil fund’s business by lavishing executives with prostitutes and vacations at five-star hotels. The relationship fell apart in 2008, after Goldman lost the Libyan Investment Authority (LIA) $1.2 billion.

Roger Masefield, a lawyer for the Libyan sovereign wealth fund, set out the background to nine trades that Goldman Sachs executed for the Libyan sovereign wealth fund between January and April 2008. Masefield said one Libyan official described Goldman as the “bank of mafiosa”.

“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,” Goldman argued in court documents. “The LIA was the victim of an unforeseen financial depression, not of any wrongdoing by” the bank.

The LIA was set up in 2006 to invest in the country’s oil wealth as its status from a pariah state was being lifted. Masefield argued that it was a nascent sovereign wealth fund with limited financially sophisticated abilities to understand the so-called jumbo and elephant trades. Goldman is disputing the claim, which was filed in 2014, and its lawyers will address the court on Tuesday.

One former executive, Youseff Kabbaj was told to “stay in Tripoli. It is important you stay super close to clients on a daily basis. Teach them, train them, and dine them.” Kabbaj organized “training” trips for LIA officials, expenses for one ran upwards of $31,000.

During a trip, Masefield said, with Haitem Zarti—the former deputy chief of the LIA’s brother, who’d been given a $51,000 internship at the bank—that Goldman paid for prostitutes. Moreover, Goldman’s lawyers said in court documents, the “provision of training and corporate hospitality” are “unremarkable features of relationships between commercial counterparties.”

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