Water Week

EWN Publishing

Local councils in NSW and WA burn their fingers after investing in complex debt products: get millions in refunds in return for their silence after investing in products with exposure in US sub-prime mortgage markets, recommended by Grange Securities

Posted by waterweek on 4 October 2007

According to Jonathan Barreet, in The Australian Financial Review, (26/09/2007, p.1), local councils had been given millions of dollars in refunds in return for their silence after investing in complex debt products recommended by the Lehman Brothers-owned Grange Securities. Exposed to sub-prime mortgage market: Woollabra, Tumbarumba and Ryde councils in NSW and Melville council in Perth were among those that had received their money back from Grange after investing in a product called Federation, which had direct exposure to the United States sub-prime mortgage market.

Fund annulled after substantial losses: Ryde group manager of corporate services, Roy Newsome, said the $500,000 Federation investment, which had shed more than 60 per cent.of its value, had been annulled at no cost to the council following months of negotiations with Grange.

Councils defend silence, call confidentiality requirements: “A confidentiality agreement was a requirement of the cancellation of the contract,” Newsome said. “From our perspective it was a good outcome. I don’t believe we have given any rights away.” The move coincided with the departure of key Grange staff, including founding director Alison Perron.

The Australian Financial Review, 26/9/2007, p. 1

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