Australia court allows claims against Lehman
Written on September 28, 2009
An Australian court has ruled that local governments can pursue financial claims against collapsed U.S. investment bank Lehman Brothers in Australia and elsewhere, a firm that is funding the litigation said on Monday.
IMF (Australia) Ltd said the Federal Court ruled on Friday in favor of town councils and others which had lost money in collateralized debt obligations marketed and issued by Lehman, opening the door to legal claims to recover their losses.
“The full court found against the validity of a Deed of Company Arrangement which had the effect of preventing the councils and others from pursuing claims against various Lehman entities in Australia and elsewhere and from pursuing payment under various insurance policies,” IMF said in a short statement.
“IMF will now fund those councils and other parties in litigation to recover monies lost when they invested in collateralized debt obligations arranged, issued and promoted by those Lehman entities.”
Lehman’s estate is facing a slew of claims from creditors worldwide, including bondholders, derivatives counterparties, states, towns and individuals.
Administrators of the London arm of Lehman Brothers said last month the claims it is handling against the collapsed Wall Street bank could total as much as $100 billion.
Lehman’s demise a year ago brought the global financial system to the brink of collapse and accountants and lawyers expect to have to work for years to sort out billions of dollars worth of assets left locked in its accounts.
About 35 councils in Australia invested A$25 million ($22 million) in Federation CDO, a long-term, synthetic instrument based upon a list of 40 residential mortgage-backed securities linked to the U.S. sub-prime market, financial magazine the Government News said in a report in April.
(Reporting by Mark Bendeich and Cecile Lefort; Editing by Jonathan Standing)
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