Will Lehman Brothers Compensate Australian Churches, Charities and Local Governmental Councils?

by jiffee on July 2, 2013

Ever since the financial collapse of 2008, investors from around the world have attempted to recoup their investments from American banks and financial entities. Lehman Brothers is just one example of many financial firms that failed in 2008, and it has had to deal with the aftermath of this failure. Part of this aftermath has been a proposed lawsuit from churches, charities and local governmental councils represented by Sydney lawyers that had funds invested with Lehman Brothers prior to 2008. After the financial collapse, these entities lost all of the funds that they held in trust with Lehman Brothers.

The proposal that has been initiated would ultimately return over $210 million to investors in Australia. On Tuesday night, legal counsel for Lehman Brothers scrambled to create a strategy to avoid the proposal. Lawyers for Lehman Brothers are currently trying to gain control over a vote that will determine whether the case can move forward. The vote is going to be held by creditors of Lehman Brothers. If lawyers for Lehman Brothers are able to be successful in pressuring creditors, then it may be possible for the vote to become dismantled.The current proposal amount does not even account for half of the funds that clients lost in the aftermath of 2008. The bankruptcy of Lehman Brothers was one of the largest to ever be filed in the world’s history. At the time of its bankruptcy, Lehman Brothers held over $600 billion in assets for investors around the world.If the case does move forward, it will be heard in federal court in the United States. It does not appear promising that the proposal settlement will be able to move forward. Lehman Brothers recently purchased the holdings of several creditors that are contemplating the vote. Now that Lehman Brothers has acquired this asset, creditors will be enabled to vote down the proposal for the settlement.

Unfortunately, it appears as though these strategic legal moves on the part of Lehman Brothers may be an attempt to manipulate the availability of the legal process for foreign investors. If the proposal moves forward, foreign investors will effectively have no legal recourse in the United States. There has been a recent decision from a U.S. federal court that found a breach of fiduciary duties in a similar case. In that case, the federal court held that Grange Securities, An Australian-held investment firm, breached its fiduciary duties to local organizations, charities and churches. It remains to be seen whether the law from this case will serve to bind the current federal court that is dealing with this proposed settlement.

The entire Lehman controversy raises important questions about the direction of the United States in acknowledging its role in the financial crisis. Currently, the federal court has an opportunity to speak its mind about Lehman’s role in the sub-prime mortgage crisis. If the United States federal court does not hold Lehman Brothers accountable in this instance, then it risks appearing to apply the law in a hypocritical and self-serving fashion. If it does hold Lehman Brothers accountable for investing in the sub-primse mortgage market and playing a role in causing the financial crisis, then investors around the world will have access to investment proceeds. Justice will be served if investors from Australia are able to recoup a portion of their losses.

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