Tuesday, June 14, 2016

Goldman Banker ‘Procured’ Prostitutes to Build Links With Libya
Jane Croft
Financial times

A Goldman Sachs banker “procured” the services of two prostitutes as part of concerted efforts by him to cement close ties with officials at the Libyan sovereign wealth fund , as the US investment bank sought to win lucrative new business, the High Court has heard.

Patrick Jenkins and guests discuss allegations against Goldman Sachs, investment banking fees in the US versus Europe, and conduct issues at Standard Chartered, with special guest, chief executive Bill Winters.

A trial in London heard that “salacious” texts were exchanged by the banker with a woman called Michella and “it is clear from the content” that she was “a prostitute”.

The details came on the second day of a $1bn legal battle brought by Libya’s sovereign wealth fund against Goldman.

The Libyan Investment Authority claims that Goldman exploited the sovereign wealth fund’s limited experience back in 2008 forcing it into risky and ultimately lossmaking derivative trades. Goldman denies this.

Roger Masefield QC, representing the LIA, told the court that Youssef Kabbaj, a Goldman sales executive, was encouraged by the bank to build close relationships with officials at the LIA.

Mr Kabbaj holidayed at his own expense in Morocco with Haitem Zarti, the younger brother of LIA executive Mustafa Zarti.

Goldman then paid for the two men to fly business class to Dubai and stay at the five-star Ritz-Carlton hotel in Dubai, the court heard.

Mr Masefield told the court that in Dubai, texts were sent from Mr Kabbaj’s BlackBerry to a woman called Michella.

The LIA barrister claimed that Mr Kabbaj procured her services and that of a “unnamed but good-looking friend for himself and Haitem Zarti” at a cost of $600 for the evening.

One text message from Mr Kabbaj read: “Hi darling, do you remember me? Yousef fom London. Just arrived in dubai. Available tonight, with a friend?”

Her reply read: “I can come to your hotel you will give me and my friend 1500?”

Mr Kabbaj forwarded Michella’s number to Mr Zarti later that week but Mr Zarti “declined and said he was getting back to God’s way and it was too late and he wanted to sleep”, Mr Masefield told the court.

Goldman had encouraged Mr Kabbaj to stay close to the LIA and to “Teach them, train them, dine them.”

Mr Zarti was also offered a much-coveted internship at Goldman despite having a résumé “which wouldn’t have made it through the first round” of the bank’s recruitment process, the court heard.

Mr Masefield was describing the extent of the LIA’s dealings with Goldman leading up to the completion of nine disputed trades in 2008 which lost the LIA about $1.2bn and made “eye-watering” profits for the bank.

Mr Masefield told the High Court that Goldman documents were “replete” with references to the LIA’s “lack of sophistication”.

He pointed to an email from Laurent Lalou, a Goldman vice-president, who described a Goldman presentation to the LIA team as being a pitch “to someone who lives in the middle of the desert with his camels”.

Hi darling, do you remember me? Yousef fom London. Just arrived in dubai. Available tonight, with a friend?
- Text from Goldman sales executive Youssef Kabbaj

Mr Masefield told the court this was a “deeply offensive” and an “astonishing” way to talk about clients “behind their backs” when the bank had completed a complex derivative trade with them shortly before.

By April 2008, questions were being asked within Goldman — including by its chief executive Lloyd Blankfein — about the profits being made on one LIA trade, the court heard.

One Goldman banker emailed Andrea Vella, a Goldman partner, in April 2008 saying that Mr Blankfein “when he found out how big the p & l on the recent trade he started asking questions about it. Pls keep this email to yourself.”

When the nature of the trades became clear to the LIA later in 2008, the fund’s senior executive Mr Zarti accused Mr Kabbaj and Goldman of “tricking” them and “being a bank of mafiosi”, the court heard.

Robert Miles QC, opening the defence case for Goldman, told the court that the trades “did not perform as the LIA had hoped” and “turned out badly.”

“This is truly a case of buyer’s remorse ...” he told the court.

He told the hearing the LIA had dealt with numerous western banks and institutions - 77 in total as counterparties.

The LIA had researched stocks and even considered other huge deals — such as a possible €1bn sale and leaseback deal on Banco Santander’s headquarters building in Spain coded named Project Block — before deciding not to proceed as “they did not have time to do due diligence”, Mr Miles told the court.

“We say that is a very telling episode,” Mr Miles told the court.

He told the court that the disputed nine trades “were described with great clarity” to the LIA and the details were “in plain sight”.

Far from having a naive team, at the time the LIA had an experienced director in Mohamed Layas who had 35 years’ experience as a commercial banker and chaired Libyan Arab Foreign Bank.

Witnesses suggest Mr Layas was “conservative” and “cautious”, Mr Miles told the court.

The trial continues.

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