Mind the Gap | Goldman wins its Libyan defence, but one has to question what price its reputation?
Today’s compliance environment demands more than static due diligence
It is easy to look at the financial world today and see nothing but a spiral of disorder, dysfunction and decline perpetuated by bankers who preside and profit over controversy after controversy.
Last week, Goldman Sachs won a $1 billion lawsuit brought against it by the Libyan Investment Authority (LIA). It is a sovereign wealth fund set up by former dictator Muammer Gaddafi with $65 billion of assets under management.
The case was based on LIA’s claims that Goldman took advantage of its lack of investment knowledge and experience and pushed it into risky derivative trades in 2007 and 2008. The US bank allegedly made $200 million in profits while the LIA lost its entire $1.2 billion investment.
Clients that claim they “didn’t know” about a trade, or “DK-ed” about why an investment was made on their account – especially when money is lost, will always be a source of disputes.
After all the wining and dining, individual and institutional clients always want to go to heaven, but are afraid to die.
In her ruling, Mrs Justice Rose completely dismissed the LIA’s claims that Goldman unduly influenced the wealth fund. She also dismissed claims that the LIA did not comprehend the nature of the disputed trades. “I find that there was no protected relationship of trust and confidence between the LIA and Goldman Sachs,” she said.
“Their relationship did not go beyond the normal relationship that grows up between a bank and a client.” She also added that the level of profits made by Goldman on the nine trades was not “excessive”, considering the amount of work and resources applied.
