Lehman Brothers - Targobank

 

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The impact of the bankruptcy of Lehman Brothers Holdings Inc. in September 2008 on the world economy was severe. The failure of Lehman Brothers was not only the biggest casuality of a company in the American history but it could be made responsible for triggering the deepest recession during the post-war period. In Germany, the Lehman failure was linked to the financial well-being of a multitude of savers without being aware of the fact that were was a link between them and the investment bank. Financial intermediaries have sold massive volumes of the bonds structured which were unconditionally and irrevocably guaranteed by Lehman Brothers Holdings, the so-called „Zertifikate". The main target of such sales efforts were risk-adverse, less experienced and the financially least sophisticated investors. An important number of these customers was misled by their financial intermediaries and were victims of miscounseling. Based on the investment experience of these investors and the risk they could effectively afford the sale of such products to them was grossly misplaced as such products should have never been sold to them. In fact, miscounselling was conducted on a massive scale: Financial advisors had either not mentioned the risks inherent to the products or downplayed these risks in their magnitude. In general, information given to the investors by their financial advisors was insufficient, misrepresented or false. In many cases the kick-back payments received from Lehman Brothers by the financial intermediary have not been disclosed. The insolvency risk of Lehman Brothers as well as its consequences for the financial product bought by the investor have remained unexplained. The negligence in explaining the functioning of these financial products by the financial intermediary represents miscounselling. The same applies to the conflict of interest between the financial service institutions involved into these transactions. This can be said especially about Targobank, a mass-seller of financial products of Lehman Brothers, being at the same time an institution which was a former main creditor of Lehman Brothers Holdings Inc.. Targobank has not only raised funds for Lehman Brothers but also benefited massively from these transactions.

 

Furthermore, the managers of Lehman Brothers Holdings Inc. are liable for the damages of the investors as well as Lehman's auditing firm Ernst & Young. The auditor has not critically examined a systematical, large scale obfuscation scheme using Repo-105 transactions with served no other objective than to obtain balance sheet relief. After being informed about these facts, Ernst & Young failed to exercise due professional care at least with respect to its duty to notify the Audit Committee.

 

After an In-depth-analysis of the case, Deminor has begun to constitute a consortium of investors with damages in Germany. Investors can register on-line and input their transaction data through Deminor's web site https://www.mydeminor.com since 12 May. The web site also gives investors access to the contract and the general terms and conditions.

 

 

Contact:

 

Bruno Wagner

Email: bruno.wagner@deminor.com

Köln office: +49 221 55 405 475