Financial Institutions Offering to Repurchase Lehman Notes in Some Countries While Fighting Investors Claims in Others

Without a doubt, the financial institutions that sold the largest quantities of Lehman Structured Products around the world are UBS, Citibank, and Credit Suisse. Yet some of these same financial institutions are partially addressing investor harm from securities fraud in some countries while fighting investors in others.

This past April, Citibank España announced that all clients who purchased Lehman Structured Products sold as “principal protected” would be entitled to get some of their money back. Citibank reached an agreement with the Association of Consumer Protection in Spain (ADICAE) in which Citibank Spain would buy back Lehman notes from the investor at a price equivalent to 55 percent of their value. The agreement was extended to all investors who purchased Lehman Structured Products through Citibank España. This offer has so far benefited more than 2,700 investors and Citibank has paid more than 78 million Euros (around $110 million).

Of course, investors in Spain who were willing to fight to get more of their money back than 55 percent had the opportunity to opt-out from the offer based on the fact that Citi marketed and sold Lehman products with a “principal protection” label.  By opting out, these investors can pursue all of their damages through formal legal proceedings.

Similarly, Citibank Belgium reached an agreement to offer a solution to Belgian customers who purchased Lehman structured products. The settlement offer includes a cash payment of 65-percent of the face value of the Lehman Brothers Notes to which Citibank Belgium customers subscribed through Citibank Belgium. Additionally, clients will be offered the opportunity to place the amount of the cash payment in a blocked 3-year time deposit account with an automatic capitalization of interest with Citibank Belgium, yielding a 5.3 percent gross annual interest rate. This would allow investors to get approximately 75 percent of their initial investment in Lehman products back within 3 years.

Citi’s latest offer to buy back faulty Lehman products from investors took place in Hungary. Just last month, Citibank Hungary agreed to reopen the settlement offer to customers still holding Lehman notes in that country. Citi is offering to buy back the notes from investors at a price equivalent to 55 percent (as in Spain). So far, more than 90 percent of the investors have accepted Citi’s offer in Hungary.

However, there are thousands of investors in many other countries that are not getting this type of compromise from Citi. Investors in Argentina, Chile, Uruguay, Venezuela, Brazil, Colombia, Mexico, Poland, India, and New Zealand,  to name a few, have lost millions of dollars on purported “principal protected” Lehman products, which Citi and others misrepresented in those countries.

Citi is not the only financial institution to make distinctions on who to partially compensate without the need for litigation or arbitration. Credit Suisse Group, another big player in the promotion and sale of Lehman Structured Notes, decided to buy back Lehman products from Swiss nationals only. As a result, Switzerland’s second-largest bank has paid around 100 million Swiss francs ($86.7 million) in compensation to 2,000 clients who lost money in Lehman related investments. Credit Suisse, however, has refused to buy back Lehman products it sold to investors who are located in other countries, such as England and Germany, for example.

In the United States, like many of the European and South American countries mentioned above, investors and their attorneys are pursuing claims with no nationwide offer of compromise to consider. In the United States, Lehman Structured Products were marketed, underwritten, and sold heavily by UBS as well as other firms and banks such as Raymond James.

In light of the fact that the principal protected structured notes were misrepresented worldwide, it is troubling that some financial institutions operating around the world are making country-specific decisions based on profitability and politics rather than righting a wrong.

Vernon Litigation Group is a U.S. based law firm in Naples, Florida. The investment fraud attorneys at the firm advocate for the rights of investors throughout the United States and abroad—both in and out of the courtroom and FINRA arbitration hearing room. They have been contacted by principal protected note investors throughout the U.S and also by investors in Argentina, Germany, England, Colombia, and other countries in South America.  The law firm is AV rated by Martindale-Hubbell, and the partners have been repeatedly recognized by their peers in The Best Lawyers in America publication and the Florida editions of the Super Lawyers publication. Christopher Vernon, the firm’s founder, has spoken at both national securities and national trial attorney conventions and has also conducted continuing education in the U.S. and abroad for CPAs, CFAs, CFPs, investment professionals, board-certified business litigation lawyers, and board-certified trust and estate lawyers.  Mr. Vernon has also provided training for and been retained as an expert by government agencies on securities matters.