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.
Board members recall how they helped start Waratah Lodge, a retirement home that has lasted 25 years.
Police are currently at the scene of a double fatal collision involving two cars in at the Cahill Road, Gilmore Street and Woods Road intersection in Yarrawonga.
Tatura Community House held its annual High Tea fundraiser at the facility on Tuesday, with a full-house present to enjoy a sumptuous morning tea, good conversation and relaxing time together.
Sam Lowndes might have been the youngest member of the North-Eastern Knights under 13 hockey side, but he still made a big impact at the Junior State Hockey Championships in Melbourne last week.
Rochester Historical and Pioneer Society hosted an afternoon tea to recognise long-standing members Barrie and Flora Griffin and John and Margaret Harley.
Boil water notice lifted on Sunday for Kyabram and Merrigum
Scone Equine Hospital relaunches local veterinary practice.
Scores of local farmers and concerned community groups will travel to Barham today to protest the Murray Darling Basin Plan in front of key Senators and Members of Parliament.
A planning scheme amendment to allow the expansion and redevelopment of the IGA supermarket at Heathcote has been approved by the Victorian Planning Minister Richard Wynne.
The second Koonoomoo Pickers and Packers Charity Ball came to town on the weekend, and was bigger and better than ever.
An exciting three-hole playoff saw Virginia Lange take a narrow win in the Deniliquin Ladies Golf Championship last Thursday.
The second annual National Herd Development Victorian Winter Fair was in action at the Bendigo Exhibition Centre last Wednesday and Thursday.
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