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Commonwealth Bank 'knew of losses' in Storm case

Anthony Marx, Christine Flatley     The Courier-Mail    August 22, 2012

A PROMINENT Storm Financial victim has harshly condemned the Commonwealth Bank over allegations that it knew investors would probably lose money during the global economic crisis but kept the information secret.

Sunshine Coast police officer Sean McArdle, who is one of the lead plaintiffs in a class-action lawsuit against the bank, said he was "disgusted" and "sickened to my stomach" to learn of the claim made yesterday in the Federal Court in Brisbane.

"I am absolutely appalled that a business that describes itself as one of the four pillars of the community would show such utter contempt for its own clients," McArdle said.

Barrister Tony Morris, QC, who is representing about 300 investors, told the court that it was "only through sheer happenstance" that two crucial documents allegedly outlining the policy were discovered recently among the 500,000 that formed the brief.

Mr Morris said he would be arguing during the three-month trial starting on September 10 that the bank had acted "unconscionably" by withholding the information. He sought leave to amend his clients' statement of claim to include allegations raised by the newly uncovered documents.

The Commonwealth Bank has objected, arguing there were "significant structural problems" with how Mr Morris wanted to run his new case. Both sides were ordered to try to iron out any difficulties ahead of the trial.

The bank was among several lenders who made high-risk margin loans to about 3000 Storm clients, who lost $3 billion when markets crashed in late 2008. Townsville-based Storm collapsed a few months later.

Class actions against the Commonwealth Bank and Macquarie Bank will run in conjunction with an action brought by the Australian Securities and Investments Commission.

ASIC alleges the Commonwealth Bank, Macquarie Bank and the Bank of Queens-land committed numerous breaches, including unconscionable conduct and operation of an unregistered managed investment scheme. The banks deny the allegations.

Lawyer Stewart Levitt, whose firm Levitt Robinson has retained Mr Morris as counsel, believes investors could recover more than $1 billion if they win the case.

About 1500 Storm clients have already reached negotiated settlements with the Commonwealth Bank, which has admitted its lending policies were "flawed".

Last modified onMonday, 15 July 2013 02:45

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