Fight Between Goldman Sachs and Libyan Fund Shadows Lawyer
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Version 0 of 1. LONDON — Within days of arriving in Tripoli in July 2008 to work on behalf of Libya’s new sovereign wealth fund, Catherine McDougall, a young Australian lawyer, was swept off on a journey into the desert. Ms. McDougall, a fund official and some of his friends set out early in the morning. Cutting across wide swaths of empty desert, their white station wagon roared down paved roads at nearly 90 miles an hour. The next day, they feasted on camel tagine and took tea on the roof of an ancient house. For Ms. McDougall, then 26, it was the start of a wild and bewildering ride that six weeks later would end up with her being pulled out of Libya by her employer, the powerhouse London law firm Allen & Overy. The law firm told her it would be initiating a disciplinary proceeding against her after a complaint from the Libyan general counsel. Rather than face that, Ms. McDougall says, she resigned. A spokesman for the law firm declined to comment for this article. Eight years later, her assignment in Libya for Allen & Overy continues to shadow her. Her experience, she says, shows the lengths that Western firms will go to keep a new but potentially lucrative client happy. Lawyers, used to working on deals and contracts for companies in London or New York, are whisked to unfamiliar and sometimes hostile surroundings to serve clients in new frontiers of finance. And when a prestigious investment bank and a giant oil-rich wealth fund ultimately came to clash in Libya, Ms. McDougall found herself becoming collateral damage. After a spell of working for DLA Piper as a lawyer in Abu Dhabi and later teaching yoga to Syrian refugees in Lebanon, Ms. McDougall came into the public eye this year. She was called as a witness in a case that the fund, the Libyan Investment Authority, had brought against Goldman Sachs. The dispute centered around losses the sovereign wealth fund sustained on a series of complex financial transactions in 2008. Ms. McDougall worked on the trades during her six-week stint in Tripoli. The trial in a London court between the Libyan wealth fund and Goldman portrayed the elaborate dance that banks engage in as part of an effort to curry favor with valuable clients. For example, the court heard that the Goldman bankers had pushed for a younger brother of the former deputy chairman of the wealth fund, Mustafa Zarti, to be included in the bank’s summer analyst internship program. But a Goldman human resources official pushed back, according to court filings, saying: “We have so few slots here this year we are not using them for candidates that aren’t here on merit.” In the end, Goldman tailored a program for the young man. The internship was among the enticements used to win influence over the Libyan Investment Authority, the fund argued in court. That influence, the fund claimed, helped push it into improper investments that led to $1.2 billion in losses. But the judge overseeing the case, Justice Vivien Rose of the High Court, last week rejected the claim and ruled in Goldman’s favor. In her judgment, she remarked on Ms. McDougall, saying that although she considered her to be a generally truthful witness, she did not have a “balanced understanding of the dynamics of the delicate situation” that existed at the wealth fund. “Ms. McDougall fairly accepts that she may not have understood fully the politics within the L.I.A. at this very sensitive time and recognizes that some senior people within the L.I.A. thought that she adopted an unhelpfully aggressive stance when speaking to the Goldman Sachs people on behalf of the L.I.A.,” Justice Rose wrote. In a telephone interview from her home in Brisbane, Australia, Ms. McDougall expressed frustration on what the judge had to say. “I am the only witness to have been found to be aggressive,” she said. “Mr. Zarti, who is alleged to have threatened Goldman Sachs and told its bankers to leave the country, was not characterized as aggressive,” she noted. A Goldman executive, Andrea Vella, who is now Goldman’s co-head of investment banking for Asia excluding Japan, was said to have banged his shoe in anger during a meeting with a Goldman salesman who was working with the Libyans. In his court testimony, Mr. Vella switched between saying he did not remember thumping his shoe in anger and claiming that the incident never happened. Since the judge’s ruling on Friday, Ms. McDougall said that two offers of employment that she had received from London law firms were rescinded. She declined to name the law firms. “I was this young girl who came in with good intentions to be the best lawyer for my client,” she said. Instead, “I was caught in the middle of the explosive disintegration of the relationship between Goldman Sachs and the L.I.A.” Ms. McDougall trained as a lawyer in Australia and, in August 2006, moved to London to join Allen & Overy, where she worked on a number of oil and gas deals in the Middle East. She barely spoke Arabic. Soon after arriving in Tripoli, she says, she realized that the documents that had been drafted to support the derivatives trades were not suitable for a sovereign wealth fund. As she pushed back, she provoked irritation among the Goldman bankers and was met with friction from the fund’s general counsel, she says. “At the start, Goldman Sachs thought, ‘Here’s someone who is going to be able to sign off on these trades,’” she said. Over time, though, it became “clear to me that the L.I.A. did not understand what they had bought” from Goldman. The judge, however, said in her ruling that although some might have regarded the trades as unsuitable, “if they were unsuitable, they were no different from many other investments that the L.I.A. made.” Ms. McDougall’s stint in Libya ended abruptly in August 2008, when the general counsel complained about her to an Allen & Overy partner. In an email, the general counsel said he was annoyed in part by a request by her to leave Libya to attend a meeting her law firm was holding in Madrid. Just a day earlier, she was in a car accident and was taken to a hospital, where, she says, she was held down against her will and given an injection. She says the general counsel asked her to hand over her passport and she refused, resulting in a screaming match. When she called partners in London and told them she wanted to leave, she says, “they told me if the client wants you to stay, you have to stay.” A few days later, a partner at her law firm phoned Ms. McDougall and said Allen & Overy was pulling her out of Libya. “Could I just reiterate that you should not speak to anyone prior to leaving the office today,” the partner wrote her in an email after the call. “The team are keen that your departure should be as low-key as possible. Just pack up your things and go.” Ms. McDougall remembers sitting on the beach on her last day in Tripoli with Mr. Zarti’s assistant, Sofia Wellesley, who is now married to the singer James Blunt. “Sofia said,” according to Ms. McDougall, “this is a terrible day for the L.I.A. Allen & Overy is never going to send anyone out here again.” But a few days later, the law firm dispatched another associate to work with the Libyan Investment Authority in Tripoli. As he was leaving, Ms. McDougall says, she gave him her remaining dinars and her Lonely Planet guide to Libya. |