BARRISTERS delivered closing submissions in the Federal Court in Sydney today in the class action hearing, brought by 72 councils, charities, churches and private investors against global investment bank Lehman Bothers Australia.
A financial firm bought by Lehman Brothers Australia generated over $60 million in profits by misleadingly selling high-risk investment products to local governments, the court heard today.
The plaintiffs are seeking $248 million in compensation for losses incurred on their investments made on advice from the financial firm Grange Securities, which was bought by Lehman Brothers Australia in 2007.
The Councils, led by Wingecarribee Shire Council, seek $248 million in compensation from Lehman Australia for claims including breach of contract and fiduciary duty, misleading conduct and negligence. The claims relate to the way collateralised debt obligations (CDOs) and other synthetic structured products were sold and marketed to the councils.
Law firm Piper Alderman, led by partner Amanda Banton, represents the applicants. Banton said: "I am looking forward to the completion of the trial and achieving a successful outcome for our clients.
Plaintiff barrister Tony Meagher SC said Grange neglected to tell its clients of the risks involved with investing in collateralised debt obligations.
The councils involved in the case had asked Grange for investments that were liquid and that could be sold at short notice.
"One thing none of them got was a product that fits that description," Meagher told the court, the Sydney Morning Herald reports.
Banton said the findings in the Lehmans case may have serious implications for the LGFS, ABN AMRO and Standard and Poors case the law firm is currently running and which is set to commence trial in October 2011 for 10 weeks.