Councils sue over Lehman Brothers collapse

The Australian arm of collapsed investment bank Lehman Brothers will be fought over in the Federal Court in a trial starting in Sydney today.Thirty-five charities, churches and councils are suing Lehman over the ruinous collateralised debt obligations (CODs), which brought the world's financial system to its knees.

They allege about $600 million worth of the Lehman-related CDOs they invested in went sour, and Lehman acted in the best interests of itself, not its clients.

Hundreds of billions of dollars worth of the complex CDOs exploded during the subprime mortgage crisis because the mortgages they were based on were effectively worthless.

The matter is now going to court after mediation broke down last week.

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