UPDATE 3-Dismissed head of Libya sovereign wealth fund stays put

Thu Feb 28, 2013 2:03pm EST

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(Adds LIA chairman quotes)

By Ali Shuaib and Marie-Louise Gumuchian

TRIPOLI Feb 28 (Reuters) - The head of Libya's sovereign wealth fund said he would remain in his post and contest the government's decision to replace him because of poor performance.

The Libyan Investment Authority (LIA) was set up in 2006 to manage Libya's oil dollars. It has assets of around $60 billion, mixed between shares, bonds, other financial products and holdings in subsidiaries.

Speaking at a news conference on Thursday, Prime Minister Ali Zeidan said deputy central bank governor Ali Mohammed Salem Hebri would temporarily take charge of the LIA until a permanent replacement for current head Mohsen Derregia was found.

"The head of the LIA will be changed. This is the government's policy. Whoever cannot do their job properly will be replaced," Zeidan said. "Up until now (Derregia) has declined to step down but he needs to do that."

In an exchange that highlights the central government's struggle to impose its authority in the new Libya since the 2011 war that ousted Muammar Gaddafi, Derregia told Reuters he did not understand the decision and could not leave his post.

"I believe the decision is not lawful, it will be contested on those grounds," Derregia said, adding he was taking the matter "before a court of law".

He said he received a letter informing him about his dismissal and another letter shortly afterwards saying a committee had been formed to handle a handover.

"Nobody came asking to organise a transition or handover or speak to me about my terms, my rights or anything like that. It was basically a sacking from the Gaddafi book."

Derregia, who said the last time he met Zeidan he told him about LIA's moves to deal with some losses in financial products globally, said he would continue going to his office for now as the fund was currently restructuring.

"I cannot leave this in a vacuum - they have to organise a transition even if they insist on that decision," he said.

Zeidan said Derregia was told earlier this week he needed to step down. He said senior LIA officials would meet in coming days to appoint a permanent replacement. Derregia was appointed LIA chairman in April. His contract was for two years.

The LIA's assets were temporarily frozen during the 2011 war, and the new management has sought their release. The LIA has stakes in Italian bank Unicredit as well as oil and gas group Eni.

Separately on Thursday, LIA said in a statement it was taking legal advice over losses on structured products managed by Goldman Sachs.

Zeidan told reporters he had a met a team from the International Monetary Fund (IMF) and Libya would seek the IMF's advice on its budget as well as domestic and foreign investment. (Writing by Marie-Louise Gumuchian, editing by Elaine Hardcastle)

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