Libyan fund loses $1.2bn claim against Goldman Sachs

The verdict comes following a two-month trial during which the Libyan Investment Fund, a $60 billion oil wealth fund established under the rule of former dictator Muammar Gaddafi, attempted to sue Goldman Sachs claiming that the investment bank had misled Libyan officials into signing derivative deals that they did not fully comprehend, and became almost completely worthless after the 2008 global economic crisis.

In its defence Goldman Sachs claimed that members of the fund were simply too afraid to take responsibility for investments for fear that if they tanked they could face execution under the Gaddafi regime.

“If we put ourselves in Libya at the time, it can’t have been easy to have been the person or the team that decides to make an investment and loses a billion dollars while the market is melting down,” said Andrea Vella, a Goldman executive, who gave testimony during the trial.

“And so at that point you either get, you know, executed, maybe to use a hyperbole, or you put the blame on someone else.”

The Libyan fund alleged that Goldman bankers tried to influence its staff with gifts and by awarding an internship to the younger brother of Mustafa Zarti, deputy chief of the fund.

Zarti was a close associate of Saif al-Islam Gaddafi, a son of the former dictator, court documents show. A spokesman for Zarti declined to comment.

However, speaking on Friday High Court Judge Vivien Rose said that the investment bank did not exercise “undue influence” over the Libyan Investment Authorities (LIA) stating that “their relationship did not go beyond the normal cordial and mutually beneficial relationship that grows up between a bank and client,” in comments published in Bloomberg.

According to LIA officials the New York based bank routinely bought gifts, rolled out extravagant entertainment, hired prostitutes, and even offered an internship to the younger brother of the deputy chief of the fund Mustafa Zarti, a close associate of Saif al-Islami Gaddafi.

Following the judge’s ruling the LIA said that it was disappointed in the outcome of the case, but that it was too soon to consider pursuing further legal action against Goldman Sachs.

In a statement posted on Twitter the investment bank said: “We are pleased to win this case, with a comprehensive judgment in our favour.”