A NSW local council has won the right to proceed with its attempts to access the insurance policies of US investment bank Lehman Brothers to recoup $29 million that it lost through financial products obliterated in the US subprime crisis.

Wingecarribee Shire Council is suing Lehman Brothers Australia in the Federal Court over collateralised debt obligations (CDOs) that were unwound when the global investment bank filed for bankruptcy last year.

Council GM Mike Hyde told insuranceNEWS.com.au he’s hopeful the council will be given access to the insurance policies so it can ascertain whether it will be able to recover some of the lost funds.
 
“We’re hoping to find that there is significant insurance coverage so that we can say that Lehman Brothers’ [allegedly] misleading and deceptive behaviour requires remedial action and we hope that the courts will support us in that,” he said.

The council lost $2.55 million after it sold its Federation CDO on advice that while its value had plummeted it was safe unless there was a global recession.

A number of other councils, charities and schools that also invested in Federation CDOs are watching the case closely. It will be heard later this month.