Muammar Gaddafi. Photo: AP

On Monday, a lawyer for the Libyan Investment Authority told a British judge that employees of Goldman Sachs, attempting to win the $60 billion oil fund’s business, lavished executives with prostitutes and vacations at five-star hotels. The relationship fell apart in 2008, after Goldman lost the LIA $1.2 billion.

According to Roger Masefield, a lawyer for the Libyan sovereign wealth fund, Goldman Sachs made nine trades on the LIA’s behalf between January and April 2008. All nine failed; nevertheless, the bank earned more than $200 million from the deal. One Libyan official described Goldman as the “bank of mafiosa,” Masefield said at Monday’s hearing.

Goldman’s lawyers have said the LIA’s claim is “both unusual and ambitious.”

“The credit crisis and its impact on global markets turned out to be far more prolonged than the LIA and the great majority of market participants had anticipated,” Goldman argued in court documents. “The LIA was the victim of an unforeseen financial depression, not of any wrongdoing by” the bank.

The LIA, set up under the late Muammar Gaddafi’s regime to invest the country’s oil money, was staffed largely by officials inexperienced with high finance. Court filings show that Goldman executives described LIA officials as having “zero-level” financial sophistication, the Guardian reports. One individual “delivered a pitch on structured leveraged loans to someone who lives in the middle of the desert with his camels.”

One former executive, Youseff Kabbaj was told to “stay a lot in Tripoli. It is important you stay super close to clients on a daily basis. Teach them, train them, dine them.” Kabbaj organized “training” trips for LIA officials, Bloomberg reports—expenses for one ran upwards of $31,000.

It was on one such trip, Masefield said, with Haitem Zarti—the former deputy chief of the LIA’s brother, who’d been given a $51,000 internship at the bank—that Goldman paid for prostitutes. From the Guardian:

According to the skeleton argument presented to the court by the LIA: “Mr Kabbaj took Haitem Zarti on holidays to Morocco on various occasions. Mr Kabbaj also took him to Dubai for a conference, with the business class flights and five-star accommodation being paid by Goldman Sachs. Documents disclosed by Goldman Sachs show that during that drip Mr Kabbaj went so far as to arrange for a pair of prostitutes to entertain them both one evening.”

The LIA said the internship “has been and may still be the subject of investigation” by the Securities and Exchange Commission in the US.

Goldman Sachs said it does not believe the internship influenced the LIA’s decision to enter into the trades. “The claims are without merit and we will continue to defend them vigorously,” it said.

Also, Goldman’s lawyers said in court documents, the “provision of training and corporate hospitality” are “unremarkable features of relationships between commercial counterparties.”