Lehman Brothers found liable for losses by Australian councils, charities and churches

Lehman Brothers found liable for losses by Australian councils, charities and churches
From: ABC September 21, 2012 5:28PM
http://goo.gl/71z9E

A FEDERAL Court judge has ruled that investment bank Lehman Brothers is liable for millions of dollars of losses incurred by Australians as a result of failed investments.

A group of 72 councils, charities, churches and private investors sued Lehman Brothers for $248 million, claiming the now defunct investment bank breached contracts and fiduciary duties, and engaged in misleading and negligent conduct.

They were seeking compensation for losses incurred on investments made on advice from Grange Securities, which was bought by Lehman Brothers Australia in 2007.

The plaintiffs claimed the bank did not make them aware of the risks involved with investing in complex financial products known as synthetic collateralised debt obligations (SCDOs).

Leading the action against Lehman Brothers was Wingecarribee Shire Council, southwest of Sydney, which sought $21.4 million in losses.

Justice Steven Rares said Grange knew the SCDOs were risky, illiquid and if sold might be realised at far less than their face value.

“For these reasons Grange is liable to compensate the councils for their losses incurred as a result of these investments,” he said.

He did not make an order on the amount of damages and instead will hear submissions on the matter on November 5.

AAP