The vampire squid’s money funnel bled Libya dry
by David Atkins
This story about Goldman Sachs’ exploitation of Libya has been making the rounds in the press, but only on the back pages and in the small links. It deserves more attention:
Goldman Sachs, the Wall Street investment bank, is being sued in London for selling Libya “worthless” derivatives trades in 2008 that the country’s financial managers did not understand. Libya says it lost approximately $1.2 billion on the deals, while Goldman made $350 million.
At the time, the Libyan Investment Authority (LIA), which invests profits from the country’s oil and gas exports, had assets worth $60 billion under former dictator Muammar Gaddafi.Goldman Sachs convinced LIA to buy long-term call options on six companies: Allianz, a German insurance and investment company; Banco Santander, a Spanish bank; Citbank, a U.S. bank; Électricité de France, a French state utility; ENI, an Italian oil company; and UniCredit, an Italian bank.
What the Libyans did not understand was that if the stocks in these six companies did not rise, their investments would become worthless. Instead the LIA executives weretaken in by a trip to Morocco as well as “small gifts, such as aftershaves and chocolates” and an offer of an internship for Mustafa Mohamed Zarti, the brother of the Libyan fund’s deputy executive director, in Dubai and London.
“The unique circumstances allowed Goldman Sachs to take advantage of the LIA’s extremely limited financial and legal experience to deliberately exploit its position of influence and to take advantage in a way that generated colossal losses for the LIA but substantial profits for Goldman Sachs,” said LIA Chairman AbdulMagid Breish in a statement.
For example, LIA paid $200 million to gamble on the value of 22.3 million Citigroupshares. At the time, these shares were worth $5.7 billion and so long as they rose in value by at least $200 million, LIA stood to get its money back and the full value of the shares. But since Citigroup’s shares did not rise by at least $200 million, LIA lost its wager.
The timing of the bets was particularly bad. Since the deals were struck in early 2008, just before the last financial crisis when most share prices tumbled, the Libyans lost their wagers.
“We think the claims are without merit, and will defend them,” Fiona Laffan, a Goldman Sachs spokeswoman in London, told Bloomberg news service.
Financial firms like Goldman aren’t just destroying the middle class here at home. They’re also destabilizing struggling and developing countries around the world for what amounts to pocket change for them.
HSBC is a drug money laundering criminal organization. JP Morgan helped destroy the American economy. And Goldman Sachs is quite literally a national security threat.
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