Orange City Council has welcomed the outcome of a landmark class action against collapsed investment bank Lehman Brothers,
Orange City Council has welcomed the outcome of a landmark class action against collapsed investment bank Lehman Brothers, but is uncertain how much of the $1 million lost in the global financial crisis will be recovered.
In July 2009, the council joined more than 71 plaintiffs seeking a combined $260 million from the liquidator of the Australian arm of Lehman, previously called Grange Securities.
Last week, the Federal Court found that Grange Securities was conflicted in its duty to give sound financial advice to the councils “and its own interest in earning very large fees or profits” in its sales of investments known as synthetic collateralised debt obligations.
Orange City Council invested in three Lehman packages each valued at $1 million.
The first two were paid out at the full principal value when they reached maturity in September 2009 and March 2012, but a third $1 million investment, which will reach maturity in March 2014, hangs in the balance as the legal proceedings continue.
Finance Policy Committee chair Chris Gryllis said it was good news for Orange, but there was some way to go before the council found out how much money they would recover.
"Justice has been done," he said.
"Council staff over the years have tried to be as cautious as possible with council investments, but it doesn't matter how careful you are."
Cr Gryllis said, unlike other councils, Orange had only been minimally affected by the collapse.
"We feel very confident and very comfortable that council is investing money for the ratepayers," he said.
"Council always has money invested here, there and everywhere."
He would not say if the recovered money would be reinvested.
"We won't make a decision until we have the money in hand," he said.
All parties involved in the lawsuit will make submissions to the court in October and the proceedings could be finalised in early November.
As of July, the council had $105,880,188 invested in a variety of institutions including BankWest, Bank of Queensland, Bendigo and Adelaide Banks, Suncorp, Bank of Scotland, AMP, St George, Westpac, NAB and Bank of Cyprus.
clare.colley@ruralpress.com
