CHCC socks it to Lehman Brothers
COFFS Harbour City Council is one of 52 councils to benefit from the successful Federal Court class action in the wake of the global financial crisis.
Lehman Brothers Australia, formerly known as Grange Securities, was yesterday ordered to compensate the councils and 20 other charitable institutions and church groups who were misled into making high risk investments.
The losses in Australia since 2008 are estimated to exceed $1 billion.
The compensation, expected to be in the hundreds of millions of dollars, will be announced before the end of the year.
From 2007, Coffs Harbour City Council put funds into collateralised debt obligations (CDOs) but the investments turned sour as the economic uncertainty caused by the US and Eurozone crisis spread across the globe.
It's believed Coffs Harbour lost at least $8.8 million.
Documents produced last July showed the council held $4.7 million in CDOs which had mostly defaulted, leaving a residual value of $892,308.
In handing down his judgement, Justice Steven Rares made a scathing assessment of the business practises of Lehman Brothers' Australian arm.
"Grange was conscious that the trust its uninformed council clients placed in it was being used to Grange's advantage," he said.
"For these reasons Grange is liable to compensate the councils for the losses incurred as a result of the investments."
