Council staff in class action
LISMORE City Council was one of 72 councils, churches and charities involved in a class action against the defunct investment bank Lehman Brothers and last week the Federal Court ruled they were entitled to compensation.
Justice Steven Rares found that Grange Securities (which was bought by Lehman Brothers Australia in 2007), had not properly advised their clients of the risks involved in highly complex financial products.
Justice Rares said councils had been particularly targeted by sub-prime mortgage-related derivatives or collateralised debt obligations (CDOs) prior to the crash in the American housing sector. He said councils were targeted because they had access to large sums of money for investment.
Lismore council had approximately $1.4 million invested with Lehman Brothers Australia.
The class action was led by Wingecarribee Shire Council, which stood to lose $21.4 million.
The ruling by Justice Rares means Lismore Council will be amongst the creditors with their hands out when Grange Securities assets are sold.
It is expected creditors will receive somewhere in the vicinity of 30 cents in the dollar of their investments.
Lismore mayor Jenny Dowell said the ruling was a "good victory" and vindication for council and its staff.
"There have been many questions in the community about whether council did things by the book. I think the actions of the court vindicate council staff," she said.