A former Goldman Sachs employee negotiated with prostitutes he was trying to provide for the bank’s clients at Libya’s national investment fund, a London court was told.
Texts between former Goldman Sachs employee Youssef Kabbaj and a woman known as “Michella” were released to reporters on the second day of a court case between the Libyan Investment Authority and the bank.
The Libyan Investment Authority is claiming it lost $1 billion (£750 million) on nine trades executed by Goldman Sachs in 2008, on banks such as Citigroup and Unicredit, as well as 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 said it would defend against the claims “vigorously”, calling them “without merit.”
Goldman Sachs became close to the LIA after Kabbaj, a former Goldman Sachs sales employee, was embedded within the organisation in 2007. There he befriending Haitem Zarti, the younger brother of a senior LIA official.
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 court heard on Tuesday claims that Kabbaj exhanged texts with a prostitute, known as Michella, to organise entertainment for him and Zarti in Dubai in February 2008, according to LIA’s lawyers. Here’s the transcript, complete with texting typos, referred to in court and distributed to reporters:
Youssef Kabbaj: Hi darling, do you remeber me? Yousef fom london. Just arrived in dubai. Available tonight, with a friend?
Michella: I dont remember u sorry. But where r u staying?
YK: Ritz carlton. We met at emirates tower then mirage. Moroccan restaurant. Moroccan.
M: Yes i remember u.want to meet 2n؛te?
YK: Cool. Michella from media city:))) with pleasure. Where? I am with a friend. We’re on our way to the hotel from the airport. Where do you want to meet? Hotel? Somewhere else?
M: I can come to your hotel you will give me and my friend 1500
YK: 200usd each. For taxi.
M: No 300
YK: Come and we will have a drink and discuss. I missed you
M: I can not do that
YK: Where are you now?
M: I am out but im not coming until there for 200
YK: OK. Come. You have a deal.
M: 300 OK? And i bring my friend too?
YK: Yes. Your friend has to be as good looking at you.
In a separate exchange a few days later, Zarti asks whether Kabbaj is “going to sleep or having some one over?” Kabbaj responds with “No. On my own. Getting back to god s way incha allah.”
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 them and profits for the bank.
Driss Ben-Brahim, a former Goldman banker, said in an email at the time: “They are very unsophisticated — and anyone could ‘rape’ them,” according to a report in the Financial Times.
Internal emails released as part of the allegations in the case also show that the amount of profit made on a single trade with the LIA attracted attention from CEO Lloyd Blankfein, who asked questions about the deal.
A Goldman banker emailed the following to partner Andrea Vella asking for details about the deal after being questioned by Blankfein:
The background here is that we are currently with tloyd in abu Dhabi. He must have gotten a brief email from someone on the Libya and rating advisory, when he found out how big the p&l on the recent trade he started asking Richard and I questions about it. I knew we did the trade but did not know the full details, neither Richard, nor I were able to answer Lloyd’s questions. Arm US my friend with the details so we can get back to Lloyd. We are seeing him again at 9 am. Pis keep this email to yourself.
Meanwhile, lawyers for Goldman Sachs, responding to the claims on Tuesday, said that the LIA was suffering from “buyers remorse,” according to a report by Bloomberg News, and that the bank isn’t responsible for the losses, which were caused by the 2008 credit crunch and financial crisis.
The trial is scheduled to last for seven weeks.