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Libya's sovereign wealth fund 'in limbo'

Tripoli, March 13, 2013

By Marie-Louise Gumuchian

 

The outgoing head of Libya's sovereign wealth fund said a decision to sack him has left its restructuring plans and the pursuit of compensation for investment losses in limbo, potentially costing the country millions.
 
Late last month Prime Minister Ali Zeidan said Mohsen Derregia, head of the Libyan Investment Authority (LIA), would be replaced under a government policy to remove those who performed poorly in their jobs.
 
In an exchange highlighting the disarray of state institutions some 18 months after Muammar Gaddafi's ouster, Derregia took his dismissal to court, saying it had come out of the blue and that he had yet to be contacted over a handover.
 
Set up in 2006 to manage Libya's oil dollars, LIA has assets of around $60 billion, comprising shares, bonds, other financial products and holdings in subsidiaries.
 
"The worst thing you can do to a financial institution like this is to create uncertainty about its direction," Derregia told Reuters in an interview at his office in Tripoli, where he still comes to work every day in preparation for handing his brief over to a successor.
 
"Any delay of restructuring LIA costs us hundreds of millions (dollars) every year. The delay in taking legal action to recover some lost assets will cost us hundreds of millions."
 
A former professor at Nottingham University in Britain, Derregia took up the post of LIA chairman last April.
 
He brought in auditors Deloitte and consultants Oliver Wyman to evaluate its assets and act as advisers as the fund sought to restructure itself, seek compensation for some loss-making investments and diversify its portfolio.
 
Work also began on the release of assets held abroad, many frozen under United Nations sanctions during Libya's 2011 war.
 
LIA successfully sought the release of stakes in Italian bank Unicredit, defence group Finmeccanica SpA and oil and gas group Eni SpA, seized last year after a request by the International Criminal Court on the grounds that they were held by the fund on behalf of the Gaddafi family.
 
On the day Zeidan publicly announced Derregia would be replaced, LIA said it was taking legal advice over losses on structured products managed by Goldman Sachs.
 
LIA has said it is cooperating with the US Securities and Exchange Commission, which is examining whether the investment bank and other financial companies violated bribery laws in their dealings with LIA.
 
It is investigating investment losses of $1.75 billion on structured products managed by Goldman Sachs and Societe Generale to see whether it could claim compensation.
 
"This year, we have made money and we recovered a value of assets of over one billion (dollars)," he said. "In nine months, we did better than the previous management in five years."
 
"FIASCO"
 
Even if his successor turns up soon, Derregia says the paperwork in getting a new management team set up and resuming work could take a while.
 
In the meantime, he is fighting his dismissal in court saying the move was politically motivated and that the decision is said to have been based on a period before he came to LIA.
 
Zeidan originally said deputy central bank governor Ali Mohammed Salem Hebri would temporarily take charge. The premier has since appointed a new board for the fund. Officials at his office said a permanent replacement had yet to be found.
 
At LIA's offices, work has ground to a halt, Derregia said.
 
Without specifying, Derregia said he had informed the government of a $120 million compensation offer from a bank LIA had made losses with but had yet to hear back.
 
"It is in limbo but I have to hand over these cases, they have to take responsibility, this is very important," he said.
 
"Ideally I would have people to hand over to so I could tell them where we are, which firms we dealt with ... to give them a head start and they could get on with it ... These are huge amounts of money - you're talking about hundreds of millions."
 
Zeidan has not commented on Derregia's claims, only saying it was his decision to make to dismiss him based on performance.
 
The LIA saga highlights the uncertainty, and often violence, still plaguing Libya, as its new leaders seek to impose their authority on a country awash with weapons.
 
"It gives an image of a fiasco going on," Derregia said.  "I have lost interest. I am coming in every day. I will give them a couple more weeks and then will shut down and go." - Reuters



Tags: investment | libya | wealth fund | LIA |

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