[photo by Henry Cobb of Pei Cobb Freed]

Goldman Sachs won a lawsuit in which Libya’s sovereign-wealth fund sued the U.S. investment bank for $1.2 billion to cover losses from derivatives it bought in 2008. The ruling follows a 2-month trial earlier this year in which the Libyan Investment Authority (LIA) alleged that Goldman executives exerted “undue influence” over its officials, who didn’t understand the trades. Goldman denied wrongdoing and said the Libyan fund understood the risks.

Goldman had arranged 9 equity-derivative trades for the LIA in 2008, and all expired worthless in 2011. Goldman reportedly earned $222 million in fees from the trades.

In her ruling, Judge Vivien Rose wrote:

“The key people in the LIA who needed to understand the trades did discuss and agree the structure of the trades with Goldman Sachs.” “There are no grounds for concluding that the level of profits earned by Goldman Sachs on the disputed trades was excessive.”

The Libyan fund alleged that Goldman bankers tried to influence its staff with gifts, dalliances with prostitutes, and by awarding an internship to the younger brother of Mustafa Zarti, deputy chief of the fund.  Yet, Judge Rose wrote:

“There was no protected relationship of trust and confidence between the LIA and Goldman Sachs”. “Their relationship did not go beyond the normal cordial and mutually beneficial relationship that grows up between a bank and a client.”