Wingecarribee sues former broker over investment loss

Wingecarribee Shire Council has taken its former investment adviser to court in a bid to recover millions of dollars lost in a US investment deal.

The shire, in the New South Wales southern highlands, invested $3 million in Federation CDO, but lost just over $2.5 million because of the fund's direct exposure to the volatile US sub-prime mortgage market, specifically Residential Mortgage Backed Securities.

In papers filed with the Federal Court of Australia, the council is claiming it relied on the professional advice of its broker, Lehman Brothers Australia, to place and manage its investments, but was misled.

"The loss was caused by the deceptive and misleading conduct of Lehman Brothers Australia, who is no longer managing council's investment portfolio," the council said.

"Council believes it has a good case to recover these losses... through the Federal Court processes."

A preliminary hearing is scheduled to take place this morning.