Sydney: An Australian firm that won a landmark case against Standard & Poor’s over financial products that collapsed ahead of the global economic crisis said it would take its fight to Europe.
IMF Australia, a listed company that funds large legal claims, won a world-first lawsuit against the ratings agency this week on behalf of 13 towns that lost US$16.5 million on AAA-rated synthetic derivatives called CPDOs.
The Federal Court of Australia ruled that S&P’s assessment of the “grotesquely complicated” CPDOs, or constant proportion debt obligation notes, as “extremely strong” had been “misleading and deceptive”.
It was the first time a ratings agency had stood trial over complex debt derivative products seen as a major driver of the global meltdown in late 2008, and IMF Australia has described the ruling as a key precedent for future actions.
IMF Australia executive director John Walker said on Wednesday he would travel to Europe at the weekend to meet with investors from Britain, France, Germany and the Netherlands to discuss a similar lawsuit over CPDOs.
“We are going to seek to leverage the (Australian) decision,” Walker told The Australian newspaper.
“I am going to speak with people in Germany and France and the UK and the Netherlands about their investment in CPDOs to see whether they are interested in joining together in a claim… to recover some compensation.”
Walker said CPDOs worth between 1.5-2 billion euros were issued in Europe in the three years before the crash.
They were known as Castle Finance or Chess notes and he said IMF Australia was exploring legal claims in Europe against S&P and the Royal Bank of Scotland (RBS), which took over the Dutch bank that issued the products, ABN AMRO.
“IMF has retained lawyers to investigate launching similar claims in Europe against S&P and RBS on behalf of major European banks and pension funds if there is sufficient demand to make proceedings commercially viable,” Walker said.
“IMF is currently determining which institutions in Europe have valid claims; that is, where the rating was a material factor in the decision to invest.”
The Federal Court of Australia ruled that S&P could only have rated the CPDO AAA on the basis “of an unreasonable combination of unreasonably optimistic inputs but not otherwise” and had failed to act with reasonable care.
S&P has rejected the decision and plans to appeal.
Dear TNT Reader,
At The News Tribe, our mission is to bring you free, independent, and unbiased news and content that keeps you informed and empowered. We are committed to upholding the highest standards of journalism, as we understand that we are a platform for truth.
Apart from independent global news coverage, we also commit our unique focus on the Muslim world. In an age marked by the troubling rise of Islamophobia and widespread misrepresentation of Muslims in Western media, we strive to provide accurate and fair coverage.
But to continue doing so, we need your support. Even a small donation of 1$ can make a big difference. Your contribution will help us maintain the quality of our news and counteract the negative narratives that are so prevalent.
Please consider donating today to ensure we can keep delivering the news that matters. Together, we can make a positive impact on the world, and work towards a more inclusive, informed global society.
Donate Monthly Subscription Annual Subscription