Deniliquin and Murray Shire councils could recoup hundreds of thousands of dollars after a court ruling.November 9, 2012 4:43am
Deniliquin and Murray Shire councils could recoup hundreds of thousands of dollars of ratepayers’ money after two landmark rulings that could have world-wide ramifications.
Deniliquin Council lost hundreds of thousands when it invested almost $3 million in Rembrant and Lehman Brothers prior to the 2008 global financial crisis (GFC).
On Monday the Federal Court of Australia ruled that three organisations involved in the Rembrant investments must pay the councils back their losses, plus interest.
Those organisations were ratings agency Standard & Poor’s (S&P), investment bank ABN AMRO and Local Government Financial Services (LGFS).
Deniliquin Council lost $466,613 from one $500,000 Rembrant investment alone.
Murray Shire Council lost $933,225 through a $1 million Rembrant investment.
However, no one knows how much the councils may receive — or when they will see a cent.
The local councils have joined with other organisations in the past four years, pursuing lawsuits to try and recover the money.
Deniliquin and Murray were among 12 councils to purchase complex investments known as constant proportion debt obligations (CPDOs).
These investments were arranged by ABN AMRO, given a AAA rating by S&P and sold by LGFS.
In her judgment, Justice Jayne Jagot labelled the AAA rating as ‘‘misleading and deceptive’’, and said the CPDOs were ‘‘grotesquely complicated’’.
The organisations were ordered to each pay back one-third of the amount lost, plus interest.
The decision is likely to have global implications, especially in Europe and the US where similar products were sold to banks and pension funds.
Deniliquin Mayor Lindsay Renwick said the ruling was a ‘‘big win all around’’.
He said the councils had ‘‘invested wisely’’, but ‘‘unfortunately it went wrong’’.
‘‘Every dollar that we don’t lose is a dollar that we can spend on our town,’’ he said.
‘‘That’s very good news for us.’’
However, there is not a $466,613 cheque in the mail just yet. S&P said it intends to appeal the decision.
When asked how long that could take, Deniliquin Council manager finance Tony Tonta answered, ‘‘who knows?’’.
‘‘It could be another 12 months, 18 months, two years.’’
And when the money does arrive, there is no telling how much there will be.
The councils had a litigation funding arrangement with IMF Australia Ltd, which means IMF will take a portion of the cash.
‘‘We will be lucky if we get half of that $466,613 back,’’ Mr Tonta said.
Deniliquin Council also had a significant development in its court case against Lehman Brothers in September.
The council was part of a class action involving 72 councils, churches and charities who sued Lehman Brothers for around $250 million, claiming it breached contracts and engaged in misleading and negligent conduct.
Justice Steven Rares ruled that the parties are entitled to compensation, but the amount is yet to be finalised.
Deniliquin Council originally invested $2.45 million in Lehman Brothers, $450,000 of which is yet to mature.
It is uncertain how much of that will be recovered.
Deniliquin Council lost $372,000 of the $2 million that has either matured or cashed out.
Mr Tonta said they had actually done ‘‘fairly well, when compared to initial estimates of losses’’ from the ill-fated investment.
There is also no indication yet of when and how much of the lost money will be returned to Deniliquin Council.
A Goulburn Valley winery has tasted a trifecta of success after being inducted into the state’s tourism hall of fame.
Beautiful weather greeted Tungamah residents for the 18th running of the Tungamah Lions Ten Thousand on Sunday.
When Keith and Marion Grumley and their growing family moved to Tatura on January 18, 1968, little did they know that it would be the start of a long and lasting connection to the town.
Garners Boxing Gym in Echuca is encouraging young people to get active with weekly boxing/cardio classes.
Rochester Rotary Club has celebrated its 50th birthday in style.
Sorting future of Campaspe pools
A theatre production with a difference is coming to Seymour.
Local athletes will go head-to-head with some of the best competitors from around the world in swimming and athletics in December.
District residents and visitors will be able to enjoy some of the region’s most beautiful private gardens on Sunday.
The 116th annual Cobram Show went off with a bang at the weekend, drawing in crowds from far and wide for two days of fun.
Tomorrow is a Total Fire Ban day in Deniliquin, meaning no fires can be lit in the open and all fire permits are suspended.
Fifty new full-time jobs will be created at Tatura with a multimillion-dollar expansion of the abattoirs expected to be announced today.
Remembering Australian political giant Gough Whitlam who once called on Benalla police to stop then Treasurer Frank Crean on his journey up the Hume to phone the PM.
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