HK Lehman investors reject settlement


HONG KONG–A group of investors in now bankrupt Lehman Brothers in Hong Kong on Monday demanded a full refund of the money they lost, dismissing a settlement offer as “unfair.” Regulators in the southern Chinese city announced Sunday that banks that sold minibonds linked to Lehman Brothers have agreed to repay tens of thousands of investors up to 96.5 percent of their investment. The 16 banks will buy back a large chunk of the financial products at the center of a major scandal, after they were sold to more than 40,000 investors before their value tanked when the U.S. bank went bankrupt in 2008. Investors ploughed a total of HK$15.7 billion (US$2 billion) of their savings into minibonds and other complex products backed by Lehman. But Sunday’s proposal was criticized by the Allied Victims of Lehman Products, a pressure group that reportedly represents about 7,000 local minibond holders in the controversy. “This is an unfair settlement proposal,” Eddy Chan, the group’s chairman told a news conference, saying the investors are “rightfully entitled to 100 percent payment”. “The simple fact is, these banks have deceived us — they tricked us time and time again. Actually, I think we deserve more than 100 percent because of the time and energy we wasted on the fiasco,” he said. Chan vowed to “keep protesting” until the investors had receive a full refund. Thousands of investors who bought the minibonds — many of them retirees — accused the banks of incorrectly selling the complex products, sparking a protracted tussle between customers, regulators and the banks over the buyback.

The 16 banks include Bank of China (Hong Kong), Bank of Communications (Hong Kong) and the Bank of East Asia.

The settlement proposal must be approved by at least 75 percent of note holders at meetings expected to be held in May. Kam Nai-wai, a lawmaker who has represented some of the investors, said the offer was “not sufficient to reflect the banks’ responsibility.” “The banks should be punished for wrongly marketing the products,” he told AFP, adding that he believes the proposal may trigger a new round of litigation among some investors. “I have reason to believe some victims will continue to explore possible legal action to seek a full repayment.” But banks and regulators welcomed the deal, with the city’s Securities and Futures Commission and Hong Kong Monetary Authority jointly saying the agreement “will provide substantial recoveries for all customers” holding the products. Former Wall Street titan Lehman Brothers collapsed in September 2008 under mountains of debt, leaving investors reeling and sending shockwave across the global financial system.