June 7, 2010 / 1:10 PM / 10 years ago

German investors sue agencies over Lehman rating

HANOVER, Germany (Reuters) - A clutch of small investors are suing the top three global ratings agencies over losses from Lehman investment products in the first cases of their kind in Germany, their lawyer told Reuters.

The Frankfurt branch of the Lehman Brothers bank is pictured in Frankfurt in this September 15, 2008 file photo. A clutch of small investors are suing the top three global ratings agencies over losses from Lehman investment products in the first cases of their kind in Germany. REUTERS/Alex Grimm

The lawsuits increase the pressure on Standard & Poor’s, Moody’s and Fitch, which were criticised for lax rating policy in the run-up to the global financial crisis.

Policy makers world wide are currently discussing ways to beef up regulation of rating agencies.

A small investor, who bought “A+”-rated Lehman certificates worth 30,000 euros ($35,820) in August 2008, has sued S&P after losing his investment following the collapse of Lehman Brothers in September 2008, his lawyer said on Monday.

“Lawsuits by other small investors against Moody’s and Fitch are in preparation and will be filed within the next couple of weeks,” Jens-Peter Gieschen added.

The bankruptcy of Lehman Brothers damaged thousands of investors and creditors and exacerbated a crisis that led to a trillion-dollar rescue of the global financial system.

“Retail investors, too, put trust in advertisements if issuers or products have good ratings,” said Gieschen, whose client filed the lawsuit at a regional court in Frankfurt, where S&P has assets and a regional base.

The lawyer said his client had a “50-50” chance of winning his case, He said the investor was prepared to go as far as the European Court of Justice.

“The lawsuit is very ambitious, but the fact that the (privately contracted) legal expenses insurance is paying the expenses of the trial indicates that it is not without substance,” Gieschen said.

If the lawsuit — which Gieschen sees as a test case against S&P — is successful, 400 other German investors who bought Lehman certificates worth 8 million euros are likely to initiate a class action lawsuit against S&P, the lawyer said.

S&P declined to comment.

The lawsuit in Germany comes at a time when investors are winning the first rounds in litigation against rating agencies and as the debate about tougher regulation is gaining momentum.

U.S. pension fund CalPERS recently won a court ruling allowing it to proceed with a lawsuit accusing the three biggest credit rating agencies of assigning “wildly inaccurate and unreasonably high” ratings, causing $1 billion of losses.

The European Union’s financial markets chief recently said he would push for new legislation to increase competition among rating agencies, which many EU leaders blame for aggravating the Greek debt crisis. He echoed remarks of various high-ranked policy makers.

Reporting by Arno Schuetze; Editing by David Cowell

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