Councils win CDO court challenge
Three Australian Councils have won a Federal Court challenge that ruled that Lehman Brothers Australia, now in liquidation, was liable for millions lost in complex financial derivatives investments, known as collatoralised debt obligations (CDOs).
The Wingecarribee and Parks Shire councils and the City of Swan, representing 72 plaintiffs and over $200 million in losses, brought the legal challenge before the Federal Court.
The court found that the three councils had been misled by negligent and deceptive advice by the Australian arm of Lehman Brothers, and had breached contract and led a breach of its fiduciary duties.
Wingecarribee Mayor Juliet Arkwright welcomed the decision, saying that it vindicated its challenge to its losses associated with CDOs.
“However the ruling does not stipulate how much, or indeed when we can expect to see monies returned,” she said. “And whilst we may never receive all of our funds invested, any money recovered will have an enormous benefit for the community as it will be fed back into Council services and community assets,” Councillor Arkwright said.
Wingecarribee Shire Council has already recovered $8.6 million from CDO investments, and still holds $11.6 million.