Goldman exec tells Libya fund trial that offering prostitutes ‘unacceptable’

LONDON,  (Reuters) – A Goldman Sachs executive’s alleged arranging of prostitutes for himself and the brother of a decision-maker at Libya’s sovereign wealth fund was completely unacceptable behaviour for an employee of the bank, the first witness called by Goldman told a court yesterday.

In a trial at London’s High Court, the Libyan Investment Authority (LIA) is attempting to claw back $1.2 billion from the Wall Street investment bank from nine disputed trades carried out in 2008.

The LIA argues that the bank took advantage of its financial naivety by first gaining its trust, then encouraging it to make risky and ultimately worthless investments.

Goldman Sachs denies the allegations and says the trades in question “were not difficult to understand”.

The LIA’s claim hinges in part on its allegations that the trades were procured under “undue influence”. It cites an internship the bank provided for the brother of Mustafa Zarti, the LIA’s former deputy chief and a key decision-maker at the fund. It also says senior Goldman Sachs executive Youssef Kabbaj gave iPods to its staff.

The court has previously been told by a lawyer for the LIA that in February 2008 Kabbaj flew the brother, Haitem Zarti, from Morocco to Dubai at Goldman Sachs’ expense, paid for accommodation at the five-star Ritz Carlton and arranged for two prostitutes to spend the evening with them at a cost of $600.