It’s been four years since the investment bank Lehman Brothers went under, and a federal court in Australia has just found the bank liable for damages in a class action lawsuit over the sale of mortgage-backed securities.
It’s the first case of its kind and could open the door to many more lawsuits from around the world.
Seventy-two city councils, church groups and other non-profits were part of the suit against Lehman’s Australian arm. The groups bought around $250 million worth of the now-infamous securities that were backed by sub-prime mortgages in the U.S. Lehman told the groups the investments were AAA rated, but the court said Lehman’s advice was misleading.
“What we dealt with, says John Walker of IMF Australia, the company that funded the lawsuit, “is to see whether or not we’d make accountable an investment bank that actually sought to target not-for-profit organizations and make profit from selling derivatives to them.”
This was the first lawsuit to look at the conduct of an investment bank, on both legal and ethical grounds, in the lead-up to the global financial crisis. Others around the world will be now be encouraged with their attempts to recover money from what’s left of Lehman Brothers.
The Australian non-profits still have another case pending against Standard & Poor’s, the ratings agency that gave those securities their AAA rating.
We’re here to help you navigate this changed world and economy.
Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.
In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.
Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.
Give today and get our limited edition tote.