Multi-million dollar settlement reached in NAB CDO class action

9 November 2012
National class action law firm Maurice Blackburn has reached a settlement on behalf of over 15,000 shareholders who are part of a class action against the National Australia Bank.

National class action law firm Maurice Blackburn has reached a settlement on behalf of over 15,000 shareholders who are part of a class action against the National Australia Bank.

NAB has agreed to pay AUD$115million in settlement of the proceedings, including interest and costs.

On 25 July 2008, NAB suffered the biggest drop in its share price since 1987 when the bank revealed it had lost up to $1b in the US mortgage crisis.

Jacob Varghese, principal lawyer on the class action said:

"This settlement provides redress for thousands of shareholders who, the plaintiffs alleged, suffered losses as a result of NAB's conduct. It once again reminds public companies of their duty to keep shareholders informed."

One of the lead plaintiffs in the case, George Vlachos, invested in NAB shares between January and May 2008 and lost over $3,000 when the stock price plunged on 25 July 2008. Father of two, George is a small business owner in Sydney. His private company Pathway Investments invests in the stockmarket to provide additional family income. He said:

"It was important to me that shareholders take a stand for the principle of continuous disclosure. For the stockmarket to work, investors have to have confidence in the system. Class actions like this send a powerful message that companies have to keep us informed of what is going on in their business."

The proceedings were launched in November 2010.

Background

In 2008, NAB was exposed to $1.2 billion in collateralised debt obligations (CDOs) which comprised asset-backed securities, including US residential mortgage backed securities. These CDOs had a heavy exposure to the sub-prime residential mortgage market which became "toxic debt" in 2007 and early 2008.

In early May 2008, the bank told the ASX that it had provisioned $181 million, in respect of its $1.2 billion CDO exposure. Two months later, NAB increased its total provision to $1.1 billion, or 90% of the value of the CDOs. That day, shareholders lost millions when NAB's share price plunged by 13.5%.

The settlement comes less than a month before the case was due to go to trial in the Victorian Supreme Court.

The class action was funded by International Litigation Funding Partners on a 'no win-no charge' basis.

Maurice Blackburn's Class actions

Maurice Blackburn's class actions practice is the largest in Australia and has secured more than $700 million in settlements for shareholders, businesses and consumers over the past 14 years.

Since 2010, Maurice Blackburn has settled three major shareholder class actions against AWB and Multiplex and Centro. Maurice Blackburn is the only class action law firm to have achieved settlements over $100m including against Aristocrat ($144.5m), GIO ($112m) Multiplex ($110m) Centro ($150m). The firm is currently acting in a series of other class actions for shareholders, victims of bushfires, floods, faulty products and price fixing cartels.  In March 2011 the firm settled a massive cartel claim against Amcor and Visy for $120m - the largest cartel settlement in Australian corporate history. It is also conducting a series of class actions against banks over bank exception fees.

 

Practice Areas: