Goldman and Libya: Did the Firm Break Bribery Laws?

With a female body guard standing behind, Libyan strongman Moamer Kadhafi arrives at the Rixos hotel in the capital Tripoli on March 8, 2011. Earlier in the day Kadhafi warned of dire consequences for North Africa and Europe if there was any Western interference in his country's affairs, in a telephone conversation with the Greek Prime Minister George Papandreou. AFP PHOTO/MAHMUD TURKIA (Photo credit should read MAHMUD TURKIA/AFP/Getty Images) Photo: MAHMUD TURKIA/2011 AFP

It's an exciting morning for Goldman Sachs conspiracy theorists: The SEC is looking into whether the company may have violated bribery laws in dealing with Libya's sovereign-wealth fund. Basically, Goldman lost almost all of Qaddafi's money, then tried to pay $50 million to an outside adviser to make it all okay.

In 2008, Goldman took on the management of $1.3 billion for the Libyan fund and promptly lost 98 percent of it, according to internal records. As an apologia — and "in return for unwinding the trades and a 'release and discharge of liability,'" says The Wall Street Journal — Goldman offered to cover the transaction costs, along with an additional $50 million, to be paid first to the Libyan fund, then passed along to a third-party adviser (which just so happened to be run by the son-in-law of the boss of Libya's state-owned oil company).

Sounds very generous of Goldman, and a little like paying a teacher not to tell your parents you flunked a test, but that's where the bribery charges come in. Even though the payment was never made (negotiations were halted when Libya descended into violence this year), just the act of offering money to foreign officials or state-owned companies makes them vulnerable under the Foreign Corrupt Practices Act. The whole thing is so bungled, from start to finish, that it almost humanizes Goldman — into a nebbishy, sweaty mess of a guy. Not too big to fail after all.

Eyes on Goldman-Libya Dealings [WSJ]