Lloyd Blankfein may have a hooker problem.
Goldman Sachs stands accused by Libya’s sovereign wealth fund of having one of its bankers pay for a prostitute and other gifts in order to win the business of the country’s $67 billion investment fund in 2006.
Goldman’s unorthodox maneuvers unduly influenced Libya’s “unsophisticated” officials to make risky trades that ended with the fund losing $1.2 billion, lawyers for the fund said in court papers prior to the start Monday of a trial on the matter.
The London trial, that could last for eight weeks, could be an embarrassment for Blankfein, CEO of the powerful Wall Street bank, and hurt the bank’s reputation.
The Libyan Investment Authority sued Goldman in 2014 claiming the bank “took unfair advantage” of the country’s unsophisticated bankers and persuaded them to buy complex derivative instruments that by 2011 ended up being worthless.
The LIA was set up in 2006 after economic sanctions on the country were lifted.
A Goldman banker, Youssef Kabbaj, was singled out for orchestrating the gifts and favors, including the prostitute, that ultimately won the bank LIA’s business.
Kabbaj also arranged a highly prized internship for an LIA executive’s younger brother.
While LIA lost $1.2 billion on the risky trades, Goldman earned $367.7 million profit, lawyers for the LIA claimed in court papers.
Goldman denies it did anything improper.
LIA’s claims are “both unusual and ambitious,” the bank’s lawyers said in court papers.
LIA lost money because global markets turned down for longer than expected, Goldman said in court papers.
In addition, “Goldman Sachs or myself never paid for any LIA employee any improper entertainment,” Kabbaj told Bloomberg. “I am under a strong confidentiality agreement but I expect Goldman Sachs to correct the facts and protect my reputation.”