A former Goldman Sachs partner warned the bank to resist the pressure to “milk” Libya’s $60 billion (£42 billion) sovereign wealth fund in an email in 2008.
The email was cited in court by the Libyan Investment Authority’s lawyer, Roger Masefield QC, in summing up the fund’s case against Goldman Sachs.
The Libyan Investment Authority claims 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.
“The biggest risk now is the natural internal pressure to ‘milk’ Libya,” Driss Ben-Brahim, a former Goldman Sachs partner covering Libya, said in the internal email sent in July 2008 before he left the firm to join GLG.
“I expect everyone and his brother at GS to be visiting them with one brilliant idea after another, some partners will want to prove they can print business and won’t have the instruments of trust,” Ben-Brahim continued.
“Don’t push hard to do big deals — not now — it has risk of backfiring. Do large delta 1 trades, avoid as much as possible complicated derivatives,” Ben-Brahim said. His email also added, “I will always use my own judgment and be fair to GS. I don’t believe in all GS stands for but for most of what GS stands for. I expect to be a good ambassador even after I have left.”
Goldman Sachs denied the claims. “The evidence at trial has confirmed the frailty of the LIA’s highly ambitious case, and has come nowhere near establishing a case of undue influence or unconscionable bargain,” a spokesman for the bank said in an email. “We have always disputed the LIA’s claim that it was financially illiterate and it is clear that they understood the disputed trades and entered into them of their own volition.”
The LIA’s lawyer said the fact that Goldman Sachs hadn’t called Ben-Brahim as a witness strengthened the Libyan fund’s case.
“They almost certainly explain why Goldman Sachs has not called Mr. Ben-Brahim to give evidence, because Mr. Ben-Brahim could not in all honesty have supported Goldman Sachs’s pleaded case that the LIA was sophisticated and capable of understanding the disputed trades,” Masefield said.
Edey also read excerpts of emails from former Goldman Sachs Partner Driss Ben-Brahim to Youssef Kabbaj, a former Goldman Sachs salesman embedded with the LIA, that said: “Stay super-close to the client on a daily basis. Teach them, train them, dine them. You need to own this client, it’s a once in a career opportunity.”
Goldman Sachs became close to the LIA after Kabbaj was embedded within the organisation in 2007. Kabbaj befriended Haitem Zarti, the younger brother of a senior LIA official.
The seven-week long trial has entered its final week in London.
In closing arguments, Goldman Sachs will point to the fact that the LIA was offered the opportunity to restructure or unwind the trades before taking heavy losses, but chose not too.
Lawyers for the bank will also highlight one of the LIA’s witnesses, Abdulfatah Enaami, has been accused of taking bribes in a separate dispute, according to documents presented to the judge.
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