Blair in Libya to 'Lobby' for JP Morgan -- After Goldman Sachs Loses $1.2 Billion in Libyan Investments
September 19, 2011
The Daily Telegraph & Forbes Magazine
When the US government lifted sanctions in 2004 prohibiting American firms from doing business in Libya, Western financial institutions flocked to the oil-rich nation. As a result, Libya wound up losing $1.27 billion in a mismanaged Goldman Sachs investment scheme. Now, Western businesses are again flocking to Tripoli only this time, The Daily Telegraph reports, it is former UK Prime Minister Tony Blair whose come a'courting -- on behalf of the US investment firm JP Morgan.
Tony Blair 'Visited Libya to Lobby for JP Morgan'
Richard Spencer, Heidi Blake and Jon Swaine / The Daily Telegraph
TRIPOLI and NEW YORK (September 18, 2011) -- A senior executive with the Libyan Investment Authority, the $70 billion fund used to invest the country's oil money abroad, said Mr. Blair was one of three prominent western businessmen who regularly dealt with Saif al-Islam Gaddafi, son of the former leader. Saif al-Islam and his close aides oversaw the activities of the fund, and often directed its officials on where they should make its investments, he said.
The executive, speaking on condition of anonymity, said officials were told the "ideas" they were ordered to pursue came from Mr. Blair as well as one other British businessman and a former American diplomat. "Tony Blair's visits were purely lobby visits for banking deals with JP Morgan," he said.
He said that unlike some other deals -- notably some investments run by the US bank Goldman Sachs -- JP Morgan's had never turned "bad." [See story below -- EAW] But he added: "Saif and his father played these people like musical chairs. At the end the reputation of the LIA was really damaged because of these interventions."
Documents found by The Sunday Telegraph published this weekend showed Mr. Blair had made at least three visits to Tripoli, twice in the lead-up to the release of the alleged Lockerbie bomber Abdelbaset Ali Megrahi in 2008 and 2009 and once last year. On the first two occasions, he was flown to the country on planes arranged by Col. Gaddafi.
A senior diplomat told The Daily Telegraph last night that the British embassy in Tripoli had arranged transport for Mr. Blair and his entourage in Tripoli and ensured that representatives were there to "greet him and see him off" at the airport.
Mr. Blair stayed overnight at the ambassador’s official residence in Tripoli and was accompanied by "several" British police officers for protection. The documents show that among the people he was due to meet in 2009 was Mohammed Layas, head of the LIA.
A spokesman for Mr. Blair said that the visits had largely been to discuss Africa, and categorically denied that he had lobbied Said al-Islam on behalf of JP Morgan. The spokesman said last night: "As we have made clear many times before, Tony Blair has never had any role, either formal or informal, paid or unpaid, with the Libyan Investment Authority or the Government of Libya and he does not and has never had any commercial relationship with any Libyan company or entity."
Mr. Blair began work in January 2008 as a £2million-a-yearn adviser to JP Morgan. Last month, American officials told the New York Post newspaper that the bank managed more than half a billion US dollars on behalf of the LIA.
The executive said that he did not see Mr. Blair at the LIA headquarters in the modern Tower of the Revolution overlooking the seafront. He said officials like himself were given their instructions by two senior Saif aides, including Mohammed Ismail, a Libyan with British nationality.
One of the letters arranging the 2008 visit, in which an aide to Mr. Blair told the Libyan ambassador to Britain that the former prime minister was "delighted" that "The Leader" was likely to be able to see him, was on notepaper headed "Office of the Quartet Representative", his formal title as Middle East envoy.
The Quartet he represents is made up of the European Union, the United Nations, Russia and the United States. A spokesman for Ban Ki-moon, the UN secretary general, said: "It's up to him to explain why he did this."
The growing closeness of the Blair government to the Gaddafi regime has already come under fire. Abdulhakim Belhadj, former leader the Libyan Islamist Fighting Group and now head of the revolutionary Tripoli Military Council, is demanding an apology after papers showed MI6 arranged for his secret extradition from Malaysia back to Libya in 2004.
Many ordinary Libyans have also expressed surprise at the policy. After the latest revelations, Hoda Abuzeid, a British Libyan whose dissident father was murdered in London in 1995, accused Mr. Blair of "selling out."
"People like Blair and those who had their eyes on the business opportunities that Gaddafi could provide sold out people like my family," said Miss Abuzeid, who has returned to the country for the first time since 1980. When he had tea in the desert with the 'Brother Leader' did he ever ask him who killed my father?"
Goldman Sachs Lost 98% of Libya's $1.3 Billion Sovereign Wealth Fund Investment
Agustino Fontevecchia / Forbes Staff
TRIPOLI (May 31, 2011) -- As civil war roars on in Libya and Colonel Muammar Gadhafi vows to remain in power, reports surfaced that the Northern African country entrusted $1.3 billion through its sovereign wealth fund to Goldman Sachs in 2007, of which the investment bank lost approximately 98%, sparking the ire of Libyan officials.
The fascinating drama includes Goldman offering Libya preferred equity and debt which could've made it one of the investment bank's largest shareholders during the onset of the crisis, as well as intimidation and violent threats by Libyan officials.
Libya's sovereign wealth fund, the Libyan Investment Authority (LIA), was among many funds set up by emerging economies to grow their export-based riches. When the US government lifted sanctions in 2004 prohibiting American firms from doing business with and investing in Libya, Western financial institutions flocked to the oil-rich nation, according to a recent investigation by the Wall Street Journal.
The LIA, headed by chief investment officer Hatem el-Gheriani and Chairman Mustafa Zarti approached 25 different financial institutions around June 2007, when the LIA was launched with approximately $40 billion in assets. Despite forging its strongest relationships with Goldman Sachs, the LWI also invested with Societe Generale, HSBC, JP Morgan, Carlyle Group, Lehman Brothers, and Och-Ziff Capital Management Group.
Recent information, derived from "interviews with close to a dozen people who were involved in the matter, and on Libyan Investment Authority and Goldman documents," show that Goldman essentially lost all of Libya's $1.3 billion investment in option contracts on a basket of currencies and six stocks.
Goldman executives including Youssef Kabbaj, executive in charge of North Africa, and Driss Ben-Brahim, an Arabic-speaking emerging-markets trading chief, met with Zarti and Gheriani in London and in Libya's capital, Tripoli. After an initial investment of $350 million in two of Goldman's most exclusive funds, the Libyans were ready for more.
Between January and June 2008, Goldman execs set up a $1.3 billion investment in option contracts on Citigroup, Italy's UniCredit, Spain's Banco Santander, German insurer Allianz, French energy company Electricite de France, Italian energy company Eni. The investment, which also included a basket of currencies, worked on the thesis that the stocks would rise in value.
But, as the crisis kicked in, the underlying securities took a nose dive, taking the value of the investment down to just $25.1 million by February 2010, a mere 2% of the original investment, according to internal Goldman documents.
Massive losses sparked the ire of Zarti, who met with Goldman's Kabbaj and another employee at the LIA's headquarters in July '08 and, "like a raging bull," cursed and threatened the Goldman employees.
Zarti, according to the Journal, is a close friend of Col. Gadhafi and maintains close ties with the Col.'s London School of Economics-educated son, Saif al-Islam Gadhafi. Kabbaj and the other Goldman employee were assigned body guards until they left the country the next day.
In their attempts to fix the relationship and make up for the losses, Goldman executives offered Libya various investment options that included large stakes in the company.
Negotiations -- which included CEO Lloyd Blankfein, CFO David Viniar, and European top exec Michael Sherwood -- resulted in the company offering to finance a $3.7 billion investment that would give LIA $5 billion in stock and a payment of 4% to 9.25% annually for 40 years. There were other offers including preferred shares, unsecured debt, a special purpose vehicle in the Cayman Islands, and investments in credit default swaps.
After meeting for the last time in June 2010, the deal never materialized. As of that date, the LIA had about $53 billion in assets. In 2011, after civil war erupted in Libya and Gadhafi said he would not step down, the US government seized about $37 million in Libyan funds, including some still managed by Goldman Sachs, according to the Journal. (Read Gadhafi's $30 Billion In US Assets Blocked By Treasury).
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