Two local government pensions are expected to continue their class action against Lehman Brothers despite the collapse of the US investment bank.
Both Lothian Pension Fund and the Northern Ireland Local Government Officers’ Superannuation Committee joined three US funds to seek millions of pounds in compensation over Lehman’s handling of its sub-prime exposure between September 2006 and June 2008.
Robert Roseman, the Philadelphia-based lawyer for the Northern Ireland scheme, said the chief officers named in July’s bid could still be pursued through the justice system.
Revised papers to continue the case which could be worth up to£4m for the Northern Irish fund alone are due to be filed in court tomorrow.
Mr Roseman said if the bid was contested it could take until next year to find out if it will proceed and what insurance existed to pay damages.
“The question that beckons is how much cover there is, and that we don’t know,” he said.
Last month asset recovery firm Goal Group warned that councils could have missed out on a£200m in payouts by not getting involved in more class action suits in the US over the past seven years ( LGC report 04/09/08 ).
Also this week, Local Authority Pension Fund Forum chair Ian Greenwood (Lab) said if markets were still in turmoil when the next fund revaluations take in March 2010, contribution levels may need to increase.
But he added: “My feeling is that the market will have steadied itself out by then.”
Thomas Dubbs, senior partner at New York law firm Labaton Sucharow, which is representing Lothian Pension Fund, said the Lehman bankruptcy just shifted the focus of the litigation.
“We intend to vigorously pursue all sources of compensation, including a substantial recovery from the directors and officers,” he said.
LGC understands that at least 12 UK pension funds are currently having their US losses monitored to ensure they do not miss out on other class-action settlements.