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Revealed: Libya`s U.S. PE Managers Include Carlyle, GS

Not long ago Muammar Gaddafi’s Libya didn’t look so bad, at least to dozens of banks and private equity firms eager to manage the country’s vast oil wealth—including, we now know, The Carlyle Group and Goldman Sachs.

After the United States and other nations lifted sanctions in exchange for Qaddafi’s forswearing nuclear weapons and paying damages to the families of passengers killed on PanAm Flight 103, money managers—backed by the U.S. government—began an elaborate mating dance to land Libyan money.

Five years later, a civil war has changed all that. Many financial firms that were successful at luring money from the $53 billion Libyan Investment Authority are now keeping silent after word spread May 26 of a leaked 2010 investment report, prepared by the accounting firm KPMG, that listed the various banks and investment companies that managed Libya’s wealth. The report was first posted by an advocacy group, Global Witness.

The names of the no-longer-secret investment firms include some of the world’s leading banks: Goldman Sachs, HSBC, JPMorgan Chase and Citigroup, among others.

The report also detailed Libya’s $390 million in private equity investments, including $120 million in the Carlyle Partner V Fund and Carlyle Mena Fund, $152 million in the Goldman Sachs Mezzanine and Goldman Sachs Peter Shill funds, $74 million in the RBS Special Opportunities Fund, $33 million in the ABC Bahrain Navis Funds, and $10 million in the Celtic Pharmaceutical Fund. In all, the LIA’s private equity investments amounted to 10 percent of its $3.9 billion alternatives portfolio.

The Carlyle Group and Goldman Sachs declined to comment on the leaked report.

Earlier this year, sanctions against Libya were re-imposed by the United States and other nations after Gaddafi used his military to quash a popular uprising in the nation’s restive eastern half. In March, the U.S. Treasury announced it had frozen more than $30 billion in Libyan assets, yet government officials refused to name the firms that were managing the LIA’s assets.

The freezing of assets was aimed partly at preventing Gaddafi from using the LIA as a piggy bank. A brief filed in mid-May by prosecutors at the International Criminal Court said that the Libyan leader “makes no distinction between his personal assets and the resources of the country.”

NATO has recently increased its bombing campaign in an effort to ratchet up pressure on the Libyan leader to give up power. Gaddafi’s representatives said they are seeking a ceasefire, especially to halt the NATO airstrikes, but rebels quickly rejected the overtures.

It was all different back in 2006 when the LIA was founded in order to invest Libya’s money. The fund was seen by Libya as a way to bring the regime closer to former adversaries like Britain and the United States. At the same time, the United States was eager to reward Gaddafi for giving up Libya’s nuclear weapons program, as well as compensating the families of victims of PanAm Flight 103, which Libyan agents were convicted of bombing.

Soon after the 2006 revoking of sanctions, Western money managers descended on Tripoli, eager to do business with the former pariah nation. Carlyle was especially active in these efforts. According to the Financial Times, Carlyle’s founder, David Rubenstein, flew to Libya in 2009 to attend the elaborate wedding of Mustafa Zarti, the man operationally in charge of the LIA. It was the second trip to Libya by Rubenstein, who first visited in 2006. That same year, according to the FT, former Carlyle chairman and former Defense Secretary Frank Carlucci hosted Col. Gaddafi’s son, Saif al-Islam Gaddafi, at a private dinner in Washington.