JPMorgan Chase & Co. acknowledged millions of dollars of payments from its subsidiary Bear Stearns to a friend of the son of Libyan dictator Muammar Gaddafi around the time it raised $200 million for the country’s wealth fund.
But the bank is refuting the Libyan Investment Authority’s central allegation in a London lawsuit that the funds were used to bribe and intimidate officials who awarded the 2007 bond deal. The payments were for help setting up introductions with the north African fund, JPMorgan said.
The lender’s Bear Stearns unit sent $6 million to businessman Walid Al-Giahmi, a close associate of the gaddafi regime, to arrange deals in a contract that was no more than a “sham” agreement, the LIA has said. In its defense documents filed with the court and released Friday, JPMorgan said that Giahmi provided "legitimate intermediary services" to Bear Stearns.
“Bear Stearns did not participate in and was not aware of (nor suspected) any fraudulent and corrupt scheme involving the LIA or Mr. Giahmi," JPMorgan said in the court documents.
Giahmi was “well-placed to effect introductions,” JPMorgan said. The businessman, who was friendly with Bear Stearns banker Nadim Shabsogh, helped to identify key decision-makers at the LIA and set up meetings, the lender said.
Bear Stearns conducted due diligence on Giahmi before hiring him, the bank said, and “no derogatory information was identified." The Libyans say Giahmi had personal connections with the Gaddafi family and regime, including Gaddafi’s son Saif Al Islam.
Bear Stearns raised $200 million for the LIA in five-year notes after the services agreement with Giahmi was signed in July 2007. Neither Giahmi nor his firm Lands Company Ltd. “provided any legitimate services to Bear Stearns,” according to the LIA’s complaint.
Instead, Giahmi bribed and intimidated the fund’s executive director Mustafa Zarti, other LIA executives, and the head of an alternative-investment team to enter into the bond agreements, the LIA said.
JPMorgan purchased Bear Stearns in 2008 at the height of the financial crisis.