STAFF and lawyers representing Gloucester Shire Council will head to Sydney next month in a bid to recoup an investment of $500,000 lost during the global financial crisis.
Law firm Piper Alderman says investors lost about $140 million on the investments offered by the Commonwealth Bank (CBA) at the centre of the global financial crisis.
Council and self-managed superannuation fund Clurname brought the action against CBA in the Federal Court last year to recover money they lost on ‘synthetic collateralised debt obligations’.
Collateralised debt obligations (CDOs) are complex financial instruments that have been blamed for triggering the global financial crisis after the sub-prime mortgage assets many contained imploded.
CDOs made up more than half ($542 billion US) of the nearly trillion dollars in losses suffered by financial institutions from 2007 to early 2009 as part of the global financial crisis.
Following the approach by council and Clurname, Piper Alderman launched a class action by placing advertisements in newspapers around the country calling for disgruntled investors to come forward.
Piper Alderman partner Amanda Banton told Fairfax Media earlier this year investors lost millions on the investments offered by CBA.
“We say there was significant non-disclosure of the risks associated with the CDOs,” she said.
“We are seeking to recover the damages for all who were sold the CDOs.”
The investors suing CBA allege they suffered financial losses as a result of advice provided by the bank to put money into the CDOs.
In a statement to Fairfax Media CBA said it provided “significant explanatory materials and risk disclosures” to purchasers of the CDOs.
“Based on the material that was provided to and acknowledged by the purchasers, they made their own decisions to proceed with the investments,” the statement said.
“The bank will defend its position and any other allegations through the courts.”
Council’s finance manager Susie Jones said the initial investment made with the CBA was worthless and council had engaged Piper Alderman to try and recoup the lost investment on the basis it was mis-sold.
“It was stated to council by the CBA that there was ‘no losing’ under this investment. It was a 99 per cent guarantee.
“Everything that was packaged complied with the State government legislation and most council policies,” she said.
The case will go to mediation on October 8.
“Any offer can be rejected and the matter would then go to court,” Ms Jones said.
Ms Jones said Piper Alderman had been engaged on a no win, no fee basis and said there was no risk of council losing any further money under the class action.