Goldman Sachs has been accused of lavishing Libyan officials with gifts such as prostitutes and trips to locations like Morocco in a bid to secure business in a court hearing today.
In a case that opened at the high court in London today, the Libyan Investment Authority (LIA) is taking legal action against Goldman Sachs on allegations that the bank lured executives into making risky trades which resulted in $1.2bn (£840m) in losses.
Goldman Sachs denies that it abused the relationship it had with LIA, with the bank's lawyers cited by Bloomberg as saying:
The credit crisis and its impact on global markets turned out to be far more prolonged than the LIA and the great majority of market participants had anticipated
The LIA was the victim of an unforeseen financial depression, not of any wrongdoing.
In particular, one Goldman Sachs banker – Youssef Kabbaj – is alleged to have "embedded" himself at an early stage in the relationship and of giving a relative of a key decision maker at LIA an internship. Kabbaj is also alleged to have taken the intern to a Dubai conference and, while on the trip, to have hired prostitutes to entertain them.
"Goldman Sachs or myself never paid for any LIA employee any improper entertainment," Bloomberg reported that Kabbaj has said in an email.
The email continued: "I am under a strong confidentiality agreement but I expect Goldman Sachs to correct the facts and protect my reputation."