The Libyan Investment Authority (LIA) has issued a claim against SocGen, three subsidiaries, Walid Giahmi and a Panamanian company in the High Court in London in excess of $1.5bn, relating to a series of four trades and one restructured trade executed between late 2007 and mid 2009.
Over the course of the period, the LIA invested US$2.1 billion in medium term notes issued by SocGen and related entities. According to SocGen’s own communications, after each of the disputed trades, it paid substantial sums, which totalled at least $58 million to Leinada, registered in Panama, allegedly for "services" provided by it to SocGen in relation to the trades.
Leinada was controlled by Walid Giahmi, who was a close friend of Saif Gaddafi, the son of former Libyan leader Colonel Gaddafi. The payments were purportedly for advisory support, including around structuring the transactions, though the legal papers highlight that the descriptions of the services provided were deliberately opaque and inconsistent, and the nature and scale of the remuneration was hidden from the LIA.
There is no evidence of Leinada providing any legitimate services in relation to any of the disputed trades; indeed SocGen had no need of support related to structuring and investment solutions from an individual with no discernable expertise on structuring financial derivative transactions.
One of the notes that the LIA invested in exposed the sovereign wealth fund to the performance of SocGen shares at a time when the financial markets were in turmoil and it had just suffered multi-billion dollar losses caused by the fraudulent trading of Jerome Kerviel, creating an urgent need for funding.
The transactions have since largely suffered significant losses, and the LIA is seeking for them to be declared as void or unenforceable as a result of the fraudulent and corrupt scheme.
In February of this year, it was reported in the media that SocGen is under investigation by the US Department of Justice for violation of anti-bribery laws in its dealings with the LIA. The reports stated that the focus of the investigations that have been launched against a number of financial institutions is on the role played by "fixers" and their part in arranging financial deals between financial firms and Libyan officials.
Mr AbdulMagid Breish, Chairman of the LIA since June 2013, said:
"This claim, together with the one against Goldman Sachs that was initiated in January 2014, reflects the desire of the LIA’s new board of directors to redress previous wrongs and seek the recovery of these substantial funds as it seeks to invest and generate wealth for the people of Libya."
"The former Libyan regime left behind many challenges in its wake. The LIA is resolved to address these challenges, and to develop a new strategy for the future. The Board has embarked on a short to medium term transformation programme to strengthen the LIA and to enhance its corporate governance in accordance with best practices, enabling the institution to invest wisely for the future."