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Lehman faces sub-prime lawsuit

Lehman Brothers, the largest US underwriter of mortgage-backed bonds, faces legal action by Australian municipal governments after the value of its sub-prime related investments dropped by as much as 86 percent.

Lehman, which manages up to A$1bn on behalf of 35 councils in New South Wales and Western Australia states, may face further action as the assets in its US mortgage-linked product have declined amid a shakeout in global credit markets.

“We strongly deny the claims made in the press statement that we have not acted in their (the municipal governments) best interests, or that we have engaged in any misleading or deceptive conduct,” a spokesman for Lehman said.

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