Staff at Libya’s investment fund were offered tickets to Polo matches, musicals in London’s West End, and seats at the Rugby World Cup Final between 2007 and 2008 by financial firms trying to win their business, a London court heard on Friday.
Lehman Brothers offered VIP Cirque du Soleil seats while Commerzbank invited a senior official at the Libyan Investment Authority to a Euro 2008 match, according to evidence provided in a court dispute between the LIA and Goldman Sachs, giving an insight into how potential clients were treated by banks before the 2008 financial crisis.
Banks such as HSBC, SocGen and Bear Stearns also paid for stays at top London hotels and meals when providing training to LIA staff, according to the evidence.
On Thursday, former LIA consultant Ali Jallal Baruni said that LIA staff were “snowed” and “very impressed” by hospitality laid on by Goldman Sachs, which included flights on private jets.
The LIA 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.”
Abdulfatah Enaami, a former LIA official, gave evidence that Goldman Sachs used corporate hospitality and training to develop a special relationship with LIA staff and influence over their investment decisions.
Enaani painted a picture of chaos at the LIA in his witness statement: “When I joined the LIA in October 2007 it was chaotic. The set up was basic. Nobody at the LIA really knew what it was doing or what they were doing.”
“There was a lack of organisational sequence. I can see now that we were trying to move from A to Z by leaping to Y without completing steps B to X first, as we didn’t know that steps B to X were necessary,” Enaani said.
Robert Miles, a lawyer for Goldman Sachs, cross-examined him on Friday, saying that the treatment laid on by Goldman wasn’t a special case, and that many banks did the same. “Whenever any [LIA staff] came to London for training, the experience was that they were provided with accommodation,” Miles said.
The court heard on Tuesday that Goldman Sachs became close to the LIA after Youssef 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.
Enaani said Kabbaj spent up to four days a week at the LIA’s Tripoli office. Lawyers for Goldman Sachs disputed this, saying he was only there for an average of three days a month between October and December 2007.
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 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 have said that the LIA was suffering from “buyer’s 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 when losses were common across the board.
The trial is scheduled to last for seven weeks.