The following article re-printed below is not good news at all. As the recriminations start, Banks will have to defend themselves and by the look of things end up paying off angry investors.
Either way the credit crunch is only starting to seriously unfold.
Barclays dismisses San Marino lawsuit
Barclays Capital will fight vigorously a lawsuit filed against it in London’s High Court by a banking client Cassa di Risparmio di San Marino, which alleges misrepresentation by the UK investment bank in the sale of complex debt products.
The San Marino-based bank is seeking damages of at least €170m (£134m) in losses and lost income related to five complex credit-linked notes bought by CRSM for €450m in 2004 and 2005.
It is also seeking unspecified damages related to the restructuring of three other complex notes in June 2005.
“The legal action has no merit and we will contest it vigorously,” Barclays said on Tuesday.
The suit is part of an increasing number of actions faced by banks over their complex credit products since the market turmoil that began last year led to widespread losses in the financial industry.
Lawyers said that many disgruntled clients are pursuing the banks that had arranged complex debt products, but that claims are mostly settled well before they near a court filing, which is seen very much as a last resort, particularly in Europe.
Barclays has faced a number of similar lawsuits over collateralised debt obligations it has structured and sold.
In 2005 it settled a $151m claim brought by HSH Nordbank of Germany.
HSH is also currently suing UBS, the Swiss bank, over alleged mismanagement of a $500m portfolio of collateralised debt obligations to London. The case, which is set to be heard in New York, was among the first to be filed over subprime mortgage losses in the wake of the credit crunch.
Barclays, meanwhile, is also named in a lawsuit filed this month by Oddo Asset Management of France in New York, which relates to two investment funds known as “SIV-lites”.
That suit also seeks damages from Solent, a London-based hedge fund that managed one of the investment funds, and from McGraw-Hill, the owner of Standard & Poor’s, the rating agency.
Bankers said Italy was beginning to discover the depths of its problems with structured products. Marco Elser, senior manager in Rome at Advicorp, an independent investment banking group, said: “Half of Italian banks don’t know what they have in their accounts, because the derivatives around which the structured products were sold are so complex that it would take an Einstein to figure it out.”
Additional reporting by Guy Dinmore in Rome
By Paul J Davies
Published: July 29 2008 19:05 | Last updated: July 29 2008 19:06
Copyright The Financial Times Limited 2008
The action above could be the first in an avalanche of law suits filed by investors who could feel a little hoodwinked by the avaricious banks and their rush to sell "products" to their clients in the headlong desire to make ever increasing profits from a "business" that should only be marginal at best.
When you run a business that has its hands in your pockets, the tendency is for it to help itself.
John Burke
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