Libya’s Sovereign Fund and Goldman Sachs Clash in Court 

A witness in a lawsuit against Goldman Sachs brought by the Libyan Investment Authority says she was stunned by a lack of due diligence in $1.2 billion in trades designed by Goldman.

When Catherine McDougall, a lawyer from Allen & Overy, arrived in Tripoli in 2008 to work with the Libyan Investment Authority, the nation’s sovereign wealth fund, she was asked to examine more than $1 billion worth of trades designed by Goldman Sachs.

What she discovered stunned her. “I asked them where the due diligence was, and they responded ‘due what?’ ” she said in a witness statement filed Monday morning at London’s High Court as part of the authority’s lawsuit against Goldman, which was filed in January.

Disputing Goldman’s characterization of buyer’s remorse, Mr. Masefield said that the relationship between the two sides broke down in July 2008, before the market collapsed, when the authority realized it had been “taken for a ride.”

Perhaps the most striking witness statement for the authority came from Ms. McDougall, who worked on temporary assignment at the authority for six weeks in the summer of 2008. When she arrived, the trades had just been executed and she was asked to look at them. She said she was “shocked” at the authority’s relationship with Goldman and felt that the bank had acted improperly.

“It was readily apparent to me that Goldman had unfairly taken advantage of the L.I.A.’s lack of financial sophistication and the trust and confidence that the various members of the L.I.A. had reposed in them and had sold the L.I.A. $1 billion worth of derivative products that the L.I.A. did not properly understand,” she said.

She said that the authority’s equity team considered Mr. Kabbaj to be their close friend and they “trusted him 100 percent and were completely in awe of him.”

Ms. McDougall was asked to leave the authority soon after it made a complaint against her before her assignment was finished, her statement said. She later left Allen & Overy and described the experience as “traumatizing.”

Goldman formed a business standards committee in 2010 to look at how it interacted with clients, including conflicts of interest, disclosure and suitability of investments. The committee, which continues to meet, made 39 recommendations, which, the bank says on its website, it has carried out.

 

Source: NYT- Libya’s Sovereign Fund and Goldman Sachs Clash in Court

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