Wingecarribee Shire Mayor Councillor Ken Halstead has today announced Council has recovered lost capital totalling $9.5 million relating to failed collaterised debt obligations (CDO’s) sold to Council by failed investment bank Lehman Brothers Australia.
The news comes after a briefing to councillors in closed session at Wednesday evening’s Ordinary Meeting of Council.
In total $9,506,387 has been recovered by Council after it instigated legal action against Lehman Brothers Australia in the Federal Court of Australia in December 2007.
Council’s total audited capital losses incurred on these investments, which were purchased on Council’s behalf by Lehman Brothers Australia, amount to $11,098,000.
Mayor Halstead said the recoveries to date were extremely pleasing.
“As it stands Council has recovered 85.6 per cent of our losses resulting from advice from Lehman Brothers Australia,” he said. “This result vindicates Council’s decision to sign with litigation funder, IMF Betham to underwrite what was very expensive legal action and lead a world-first legal case against Lehman Brothers.”
“This resulted in the successful action to recover funds from the failed CDO’s sold to council.
“It’s also important to acknowledge the efforts of Council’s Finance team and the 2008-12 Council, in particular then Chair of Council’s Finance Committee, former Councillor Juliet Arkwright who led the charge,” Mayor Halstead said.
In September 2012 Justice Steven Rares of the Federal Court of Australia ruled that the parties involved in the class action were entitled to compensation for losses incurred on investments made on advice from Lehman Brothers Australia.
Justice Rares said at the time that he found that Lehman Brothers Australia had engaged in “misleading and deceptive conduct” when it promoted the CDO’s to councils across Australia as secure low-risk investments.
Mayor Halstead said Council had also been reimbursed all legal costs incurred prior to entering into a funding arrangement and was optimistic of further recoveries of the remaining monies in the coming months.
“In addition to the $9.5 million returned so far we’ve also recovered Council’s total legal bill of $724,894,” he said. “This was incurred up until the point when the litigation funder stepped in.”
“We’re hopeful that further recoveries are made available as soon as next year.”