March 25 (Bloomberg) -- Standard & Poor’s and two other defendants who were ordered to pay about A$20 million ($21 million) to Australian towns for losses on top-rated securities whose value plunged during the global financial crisis, sought to appeal the judgment, IMF (Australia) Ltd. said.
“IMF will provide funding for the defense of the appeal,” the litigation funder said in a statement today. The federal court of appeal must agree to hear the case for the hearing to go ahead.
Australia Federal Court Justice Jayne Jagot in November found S&P, ABN Amro Bank NV and Local Government Financial Services Pty liable for misleading the towns with descriptions and ratings that gave the impression of safe investments. She awarded the towns A$20.2 million plus costs incurred in the litigation in a ruling earlier this month.
The ratings were based on the “good faith judgment of analysts,” Richard Noonan, an S&P spokesman, said in an e-mailed statement on March 1 after the court ruling. “The ruling is at odds with a number of well-established legal principles,” Noonan said at the time.
Twelve Australian councils lost more than 90 percent of the A$16 million they invested in notes rated AAA by S&P. The ratings company unit of McGraw-Hill Cos. was accused by the U.S. last month in a separate lawsuit of inflating grades on mortgage-backed securities to win business, helping trigger the worst financial crisis since the Great Depression.
The U.S. is seeking as much as $5 billion in damages in its lawsuit filed Feb. 4 in Los Angeles. S&P rated more than $2.8 trillion of residential mortgage-backed securities and about $1.2 trillion of collateralized-debt obligations from September 2004 through October 2007, according to the U.S. complaint.
In Australia, the so-called Rembrandt notes were arranged by ABN Amro Bank NV, now part of Royal Bank of Scotland Group Plc, rated by S&P, and sold to the Australian councils by municipal adviser Local Government Financial Services.
The case is: Bathurst Regional Council v. Local Government Financial Services Ltd. NSD1268/2010. Federal Court of Australia (Sydney).
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