Tuesday, October 7, 2014

Goldman Sachs Gave Libyans 'Girls and Alcohol'

I suspect there is a suspicion that banksters like Goldman Scahs are dealing with very sophisticated people, all the time. But the greatest opportunities for banksters is often when dealing with dumb money. As appears to be the case when Goldman advised the Gadhafi-era Libyan sovereign wealth fund,

Details of Goldman's relationship with the Libyan Investment Authority have now come to the surface as a result of a court filing.

A statement by attorney Catherine McDougall, who worked for the Allen & Overy law firm before being assigned to the LIA, claimed that the relationship between Goldman and the fund was too close and that the bank's employees had unfairly taken advantage of the LIA's lack of financial knowledge to sell it derivative products that it did not understand, reports CNBC.

The disputed derivative trades in early 2008 cost $1 billion, and carried a high degree of risk, but lost a substantial amount of value by the end of the year and expired "worthless" in 2011, the LIA says.

McDougall said she started her assignment in Libya shortly after the trades were made and quickly became surprised at the lack of knowledge and experience, especially with derivatives, that LIA employees had.

"They did not appreciate that the trades did not involve share purchases and they were completely synthetic products. I asked them where the due diligence was and they responded 'due what?' They said that they did not ask for any due diligence—there was no need to since Goldman had advised them to do these trades. They completely trusted Goldman," McDougall's witness statement said...

"They told me about their lavish trip to Morocco and that there was heavy drinking and girls involved and that the trip was paid for by  [Goldman Sachs banker] Youssef Kabbaj mostly on his Goldman corporate credit card," McDougall's statement said.

Dumb money likes to party. I know a Swiss-based investment banker who once told me that he keeps three calls girls employed full time as he travels Europe and cuts deals.


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