It has been known for some time that the Justice Department and the Securities and Exchange Commission have been investigating investment banks over their dealings with the Libyan sovereign wealth fund, known as the Libyan Investment Authority (LIA). There is an interesting civil trial currently in session in London’s High Court between Goldman Sachs and the LIA that may well provide insight to potential Foreing Corrupt Practices Act issues.
According to articles in the Financial Times, the New York Times, and elsewhere, testimony brought forth in the Goldman/LIA case might put Goldman under some amount of Justice Dept. and SEC scrutiny for potential FCPA violations. One LIA official testified that Goldman entertained LIA staff and provided them with chauffeur-driven cars during a London-based training course and that LIA had a "special relationship" with Goldman.
The claim that Goldman provided special hospitality to the LIA during London training was backed up by separate testimony, which also noted during a very expensive business trip to Dubai, Goldman paid for an LIA official to fly business class and stay at the five star Ritz-Carlton hotel to attend a Goldman conference. Apparently not understanding (or not caring) about the FCPA implications of its explanation for these expenditures, Robert Miles QC, the barrister representing Goldman, “told the court that there was “nothing unusual” about the corporate hospitality.
It has also been reported that Goldman hired the younger brother of an LIA official as an intern, although this person was “unsuitable” for the internship position. He was hired directly after the investment bank secured business from the LIA. Most interestingly, Goldman officials testified at trial that the internship for the family member was for “a different purpose and objective,” which included that the person might rise up high in the ranks of the LIA and favor Goldman going forward.
These are all serious details that fall squarely within the realm of FCPA-worthy investigation. That the LIA has alleged that Goldman essentially fleeced the fund by taking advantage of the fund's overall naivete and lack of experience paints an ugly picture with little room for any kind of sustainable behavior. Whether or not things are as bad as this recent testimony suggests might only be known if and when FCPA investigations follow.
Continue the conversation at Compliance Week Europe: 7-8 November at the Crowne Plaza Brussels. Join us as we look at changes in global anti-corruption regulations, slave labour risks in your supply chain, and how to detect fraud, to name just a few topics. Learn more