Council staff lead claim for Lehmans' billions

Published on Saturday 20 September 2008 11:50

A PENSION fund for council workers in the Lothians is leading a multi-billion dollar lawsuit against bosses of stricken US financial giant Lehman Brothers.

The Lothian Pension Fund (LPF), which has 67,000 members mainly from the councils of Edinburgh, West Lothian, East Lothian and Midlothian, claims the firm did not fully disclose the severity of its financial position.

It had already launched a claim for the 1.9 million it lost as a result of Lehman Brothers' shares nose-diving.

But because the bank has now filed for bankruptcy, the fund is to "aggressively" pursue the claim against the company's chairman and chief executive, and other key directors and officials.

If successful, lawyers say the action would automatically trigger the need for the firm to pay compensation to everyone who invested in shares in it in the same period as the pension fund.

It would mean chairman and chief executive Richard Fuld, president and chief operating officer Herbert H McDade III and other senior figures would personally be liable for payments to shareholders.

Thomas Dubbs, senior partner at New York law firm Labaton Sucharow, said: "Because Lothian represents a class of investors, everyone who bought Lehman Brothers stock in the key period of time could get compensation.

"Thousands, or even hundreds of thousands, of shareholders have invested several billions of dollars. It is an extremely significant case for everyone."

Between November 2007 and May 2008, LPF invested 6.4m in Lehman Brothers shares.

It claims that it lost 1.9m because the price of shares in the firm dropped dramatically after it informed the market about its true financial position.

Councillor Tim McKay, convener of the committee that oversees LPF, said: "Our prime concern is the financial wellbeing of our members.

"If we can get extra money by suing a company that has done wrong then that's what we'll do.

"It is a high-profile one, and what is significant is that we have gone beyond the corporate veil and went after the officers. That is a development that will attract attention all around the world. It really is quite radical."

The first hearing in the case, in which LPF is "lead plaintiff", will take place in New York on September 26.

Mr Dubbs added: "The key allegation is that they violated US security laws by not fully disclosing their exposure to the credit markets."

As long as Lehman Brothers is not lifted out of bankruptcy, the directors and officers involved would have to pay LPF and other investors damages.

LPF, which represents employees from 120 companies, is also taking the lead in an action against oil giant BP after it saw its shares in the company plummet following an oil spill that led to Alaskan oil fields being shut down.