Libyan Investment Authority: No, Really, We LITERALLY Had No Idea What Goldman Was Selling Us

This point cannot be stressed enough.
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Hard on him that it is on you. (Getty Images)

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Hey, remember that court case going on in London involving Goldman Sachs and the Libyan Investment Authority, the latter of which claims the former took advantage of it vis-à-vis nine equity derivatives trades, costing the LIA $1.2 billion and scoring Goldman Sachs a profit of $222 million? You might've forgotten, what with that other thing going on across the pond at the moment but it's still happening. Before Britain voted to GTFO of the EU, we'd heard:

  • The LIA argue that its "management team during the Gaddafi-era in 2007 and 2008 was financial naive and unsophisticated," leaving an opening or Goldman to come in and manipulate it.
  • That a Goldman Sachs banker, Youssef Kabbaj, supposedly "embedded" himself with LIA employees, allegedly plying them with “expensive entertainment and stylish hotels,” a holiday to Morocco, a “highly coveted” Goldman internship for the brother of a “key decision maker at the LIA,” and, of course, prostitutes.
  • That Goldman bankers allegedly went after the LIA like a swarm of killer bees, making an ex-LIA consultant feel "almost under attack as different Goldman Sachs teams and products were presented to me, one after the other and almost relentlessly, without me even being given the opportunity to ask questions or reflect on them."

Today, lawyers for the LIA attempt to stress just how financially naive they mean when they say financially naive. Turns out the answer is: really friggin' financially naive.

Catherine McDougall was temporarily transferred to the LIA by London-based law firm Allen & Overy for six weeks in July and August 2008. She told the High Court on Tuesday that after arriving in Tripoli she was surprised to learn that the Libyan fund managers didn’t understand the trades they had entered into with Goldman. “There was a sea of confusion at the LIA, which ranged from an understanding that they had purchased shares, quasi-shares or shares with deferred payment,” Ms. McDougall said. “I was really surprised as it did not take rocket science to realize that the product was completely synthetic,” she said. “There were no shares involved.” The cash-based trades were tied to movements in the share prices of companies including Citigroup Inc. but didn’t confer ownership of the shares.

Someone else might've taken that almost shocking, almost unbelievable lack of financial literacy as just that, not believable, but this is actually coming from someone on the Libyans' side.

Goldman’s lawyer, Robert Miles, asked her if LIA officials were “trying to blame” the New York-based investment bank because they had realized by July 2008 that the trades weren’t working in their favor. “I don’t think so,” Ms. McDougall responded.

Libyan Fund Officials Didn’t Understand Goldman Trades, Attorney Says [WSJ]

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