The Goldman Sachs Group, Inc.
) stopped its attempt to dispose a $1billion lawsuit filed by the
Libyan Investment Authority (LIA), a sovereign wealth fund at
London's High Court. Previously the company looked for a summary
judgment on the suit, but finally pulled its request back. Summary
judgment means determination of a legal case without trial.
The lawsuit filed in Jan 2014, pertained to dealings made by the
company with the LIA in the earlier part of 2008, which led to
substantial losses for the sovereign fund.
In May 2011, the Libyan Investment Authority, which was once under
the authority of the late Muammar Gaddafi, lost almost 98% of a
$1.3 billion bet on currency movements and other complex trades
handled by Goldman in 2008. However, Goldman booked profits of
around $350 million on these equity-derivatives trades.
Since then, the sovereign fund's ties with Goldman have been
strained. The U.S. banking giant advised the fund to recoup the
losses through structured-finance instruments or investment funds.
However, these would have required LIA to invest more money through
The lawsuit alleged that Goldman leveraged on its relationship with
the fund and unfairly influenced the LIA officials who had limited
financial and legal expertise, leading to the soured investments.
Also, it accused Goldman of maintaining inadequate documents
concerning the trades. The company often failed to provide timely
information about the trades to LIA.
Gradually, when the reality of the complex trades came into light,
it became apparent that Goldman had taken undue advantage of the
trust LIA had placed on the Wall Street giant.
Goldman applied for the summary judgment request in Apr 2014 as it
believed that the chances of LIA's success in a trial were dim.
However owing to the withdrawal of its request, Goldman will face a
court hearing, which is scheduled in early October. The company
believes that "the case is entirely without merit." So it will
defend the case strongly.
Currently, Goldman carries a Zacks Rank #2 (Buy). Some
better-ranked stocks in the finance space include Select Bancorp,
), Piper Jaffray Companies (
) and Capital One Financial Corp. (
). All these stocks sport a Zacks Rank #1 (Strong Buy).
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