Bloomberg News

WestLB Loses Appeal in $22.3 Million Case Over Worthless Bonds

April 24, 2012

WestLB AG lost an appeal over whether it is owed $22.3 million by Nomura Holdings Inc. (8604) after the Japanese bank decided debt securities it had created became worthless at the height of the financial crisis.

The lender appealed an earlier decision in favor of Nomura by a U.K. judge, who said Dusseldorf, Germany-based WestLB failed to prove the valuation resulted in losses that wouldn’t have occurred anyway, according to court papers. Judge Bernard Rix turned away the government-owned bank’s appeal in a ruling handed down today in London.

The securities, linked to an Asian investment fund, were to mature in November 2008. As a result of the banking crisis caused by the collapse of Lehman Brothers Holdings Inc., Tokyo- based Nomura couldn’t find bidders to establish the value of the notes and concluded they were worthless, court documents said.

“This was a bad time to have to value the portfolio of assets within the fund, but the issue in this litigation is nevertheless as to its proper valuation,” Judge Rix said in the judgment. “If everything had worked as it was supposed to have worked, the parties to this litigation ought to have had no exposure to the risk.”

Judge Rix in London ordered WestLB to pay 75,000 pounds ($121,000) in costs to Nomura.

Nomura in 2003 sold WestLB structured notes linked to the Global Opportunities Fund, which was managed by First Capital Management Ltd. of Mauritius, and arranged by the firm’s managing director, Rafat Rizvi.

Nomura later determined there was no public information about many of the entities in which the fund invested, and that one of the entities was fake, according to court filings in the lawsuit. Indonesia issued an arrest warrant for Rizvi, Nomura said in the filings.

The trial court case was WestLB v Nomura Bank International Plc & Anr, 09-497, On Appeal From the High Court of Justice, Queen’s Bench Division, Case No. 09-497.

To contact the reporter on this story: Jeremy Hodges in London at jhodges17@bloomberg.net

To contact the editor responsible for this story: Christopher Scinta at cscinta@bloomberg.net


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