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.
Emergency services are at the scene of a two-car crash at Goulburn Valley Hwy, Shepparton near the Goulburn Valley Equine Hospital
The under 16 Pigeons kick started the YFNC's finals campaign with a resounding victory over the Paul Spargo led Scots College in the Grand Final of the AWJFL Elwyn Langford Shield at the Albury Sports Ground on Sunday.
Greater Shepparton City Council was successful in securing the National Cutting Horse Association Victorian Futurity Cutting Horse Championships for 2014 and 2015, with this year’s event scheduled from September 10-14 at Tatura Park.
Cohuna and Kerang hospitals have refused proposals from St John of God Pathology informing them they will ‘strongly resist change’ and expect the organisation to honour their contract.
Julie Sands and Sheridan Clark have been kept busy, visiting Rochester recently yo dispense free coats to residents.
Book Week gets colourful turnout.
Deaprtment of Environment and Primary Industries unhappy about Mt Disappointment vandals.
Jerilderie Shire deputy mayor Ruth McRae handed the key over for the new Rural Fire Service station last Friday.
Farmers have a new weapon in the fight against mice.
Cobram supermarket seeks $10 million expansion, increasing by about a third into adjacent car park area.
Public interest to determine Deniliquin Town Hall refurbishment.
Milk co-operative, Murray Goulburn has posted a record financial result, recording an after tax profit of $29 million.
The Benalla Indian Myna Action Group will pay a $1 per bird bounty on live birds delivered to CAL farm. National Party MP Bill Sykes donated $100 to fund the bounty.
Discover unbelievable local deals from local businesses every week in the Goulburn and Murray Valley area with Leapon.com.au!
Search properties for sale or rent across North Central Victoria and Southern NSW. Visit your local website for local homes....
Search for published and unpublished photos from McPherson Media Group newspapers and magazines. All our photos are available to purchase.
Place an advertisement in any one of McPherson Media Group's local newspapers.