High court hears further detail of alleged involvement of sex workers in winning Libyan investment in day two of trial

A Goldman Sachs banker procured the services of two prostitutes for $600 a night in an attempt to win business from a cash-rich investment fund set up by the Gaddafi regime, the high court in London has been told.

Further detail of the alleged involvement of sex workers in winning business for the investment bank – one of the prostitutes was said to be called Michella – was revealed on the second day of a case in which the Libyan Investment Authority is claiming $1.2bn (£847m) from Goldman Sachs over nine loss-making trades that took place between January and April 2008.

Goldman is defending the case, which was first tabled in 2014, and argues that the LIA lost out on its nine trades because of “unforeseen financial depression, not of any wrongdoing” by the bank.

The particulars of the prostitutes had been recovered from the BlackBerry of a Goldman banker, Youseff Kabbaj, whom the court had been told on Monday was a key contact with the LIA.

Roger Masefield, QC for the LIA, told the court he would not read out the “salacious” detail in the text exchanges, in which he tries to haggle down the price and asks her to bring along an equally good-looking friend . The allegation is that the services of the sex workers were bought by Kabbaj as he attempted to get closer to Haitem Zarti, the brother of a senior official at the LIA.

Masefield said Kabbaj was forming links with Zarti to win business for Goldman from the LIA. The court had been told on Monday that Goldman had agreed a paid internship for Zarti, which Masefield said was intended to influence decisions by the investment fund. Goldman said this is not the case.



Robert Miles, QC for Goldman, addressing Mrs Justice Rose for the first time, said: “We say that this truly is a case of buyers’ remorse.”



The LIA had expected to make large profits on the nine trades on companies such as electricity company EDF and US bank Citigroup. But, Miles said:“The underlying stocks tanked. What it [the LIA] seeks to do with this claim is to get its money back for an investment which turned out badly for it”.

Miles also said that contrary to the arguments being put forward by the LIA, officials at the fund had been shown the complexity of the transactions in which they were getting involved and had selected the companies in which they wanted exposure.

He began setting out Goldman’s defence after the court was shown the texts about the prostitute, which Masefield said were in the recovery file on Kabbaj’s BlackBerry, and sent on 24 February 2008 when he and Zarti were in Dubai.

Kabbaj is not being called to give evidence, the court has been told, because of a settlement agreement with the bank over a $4.5m bonus in 2008.

Masefield said the text messages showed that Kabbaj had also forwarded the details of the prostitute to Zarti later. Zarti had replied he was “getting back to God’s way and it was too late and he wanted to sleep,” Masefield said.

The prostitutes were hired after Kabbaj and Zarti had flown into Dubai from Morocco to attend a conference, according to Masefield. “Haitem Zarti’s business-class flights to Dubai were paid for by Goldman Sachs, as was his accommodation in the five-star Ritz Carlton.”

Even though Zarti was not an LIA official, he had been showered with corporate hospitality, Masefield said.

Masefield told the court the profits being made by Goldman on the trades with the LIA were so large that Lloyd Blankfein, chief executive of the firm, had raised questions on 27 April 2008 while on a trip to Abu Dhabi.

One Goldman executive emailed another: “Arm us my friend with the details so we can get back to Lloyd. We are seeing him again at 9am. Keep this email to yourself”.

Witnesses are called this week. Among those to provide witness statements are Sofia Wellesley, the wife of the singer James Blunt, who used to work as a PA at the LIA. It is not yet clear if she will be called to give evidence.