It looks like the Arab Spring uprising in Libya may lead to Goldman Sachs and others having some major problems. The focus on Libya has brought to light some very odd investment transactions between Gaddafi's Libyan "Sovereign Wealth Fund" and the investment firm that was also heavily involved in the financial crisis.
When Gaddafi's Libyan "Sovereign Wealth Fund" made some investments with Goldman Sachs, the losses were so bad that Goldman offered Gaddafi a major share in their stock.
Goldman traded $1.3 billion in Libyan funds: report
– May 31, 2011Posted in: THE INVESTMENT MAGAZINE THE ORIGINAL - ASIA
Goldman Sachs invested more than $1.3 billion from Libya’s sovereign-wealth fund in currency bets and other trades in 2008 and the investment lost more than 98 percent of its value, the Wall Street Journal reported, citing internal Goldman documents.
When the fund, controlled by Col. Muammar Gaddafi, made huge losses Goldman offered Libya the chance to become one of its biggest shareholders, the Journal said, citing people familiar with the matter.
Goldman Sachs was not available for comment, outside of normal U.S. business hours.
Among the different proposals put forward by Goldman Sachs to recoup the losses was one in which Libya would get $5 billion in preferred Goldman shares in return for investing $3.7 billion into the securities firm, the paper added.
http://investmentmagazin.com/...
The interesting question here is why would Goldman even offer preferred stock at a discount rate to a disgusting, autocratic regime? Were they afraid that other, uncomfortable matters, might come to light if they did not?
The SEC seems to suspect that this might be the case:
JUNE 9, 2011
Eyes on Goldman-Libya Dealings
Regulators Are Examining Whether the Big Bank, and Others, May Have Broken Bribery Laws
By JEAN EAGLESHAM, LIZ RAPPAPORT and MARGARET COKER
U.S. securities regulators are examining whether Goldman Sachs Group Inc. and other financial firms might have violated bribery laws in dealings with Libya's sovereign-wealth fund, according to people familiar with the matter.
Enforcement lawyers at the Securities and Exchange Commission are reviewing documents that detail the firms' relationships with the Libyan Investment Authority controlled by Col. Moammar Gadhafi, these people said.
Among other things, SEC officials are interested in a $50 million fee Goldman initially agreed to pay the Libyan sovereign-wealth fund as part of a proposal by the New York company to help the fund recoup losses, according to these people. The Libyan Investment Authority would have passed on the $50 million payment to an outside adviser, The Wall Street Journal reported last month.
That outside adviser, Palladyne International Asset Management BV, was run at the time by the son-in-law of the head of Libya's state-owned oil company.
snip
Carlyle, Och-Ziff and J.P. Morgan declined to comment.
The SEC review is separate from the agency's broad antibribery probe of the financial industry's ties to sovereign-wealth funds, according to people familiar with the matter. The Journal reported earlier this year that Citigroup Inc., Blackstone Group LP and other firms were sent letters of inquiry by the SEC. Citigroup and Blackstone declined to comment.
http://online.wsj.com/...
This sounds pretty fishy, to say the least, and it's not surprising to see other familiar names, such as JP Morgan and the Carlyle Group, involved in this matter, as well.
It is also noteworthy that there is an ongoing antibribery probe that involves other major financial players.
While the mainstream media talks up all the stories about Weiner's Wiener, it seems that there are some events taking place that deserve our attention far more, yet are not talked about all that much.
Update due to diary making the reclist:
Thanks for hieving this diary on to the reclist, fellow Kossacks. It's nice to have written a diary that makes the reclist while relaying some good news.
Hope you all have a great day.