Commonwealth Bank shareholder and political agitator Paul de Havilland has approached Melbourne law firm Maurice Blackburn about filing a counter class action lawsuit against the victims of Storm Financial. He says he plans to consider also taking legal action against the bank’s senior management for negotiating a settlement with the aggrieved investors.
De Havilland is calling on the Commonwealth Bank to withdraw the offer it has put on the table to Storm investors and cease negotiations with their legal team immediately. He is also calling on other Commonwealth shareholders to mount a class action countersuit against the victims of the Storm collapse.
Some two thousand Storm Financial investors are seeking damages from the Commonwealth Bank and other lenders for losses suffered when their margin loan portfolios began going into margin call in October 2008. The Commonwealth Bank has agreed to a settlement, although many investors are seeking a better deal.
De Havilland describes the bank’s offer to the investors as akin to a ‘heads you win, tails you don’t lose scenario.’ As a Commonwealth Bank shareholder, he claims he should have been advised of the bank’s intended course of action and consulted by management. He also argues Storm Financial investors have swayed the debate using political, rather than legal, pressure.
‘The high profile nature of this case has made it appear expedient to agree to a settlement,’
De Havilland claims the bank’s caving in to Storm victims creates the same sort of moral hazard – the problem of encouraging poor decision-making by not exposing economic agents to the full consequences of failure – as was illustrated in the US banking sector, with the American government bailing out a number of large institutions during the global financial crisis. He argues both US banks and Storm investors relied on their profile and size to push their case.
‘No margin loan investor – me included – could hope to apply this sort of pressure on their lender for selling shares out from underneath them in the event of a margin call, unless they had a strong media profile. The Storm victims’ argument has no legal foundation whatsoever.’
De Havilland has urged every average Australian investor to buy at least one share in the Commonwealth Bank and apply pressure on the company to stop negotiating. ‘Our bank should be foreclosing on any properties put up as collateral. Storm investors were willing to bet their houses on the stock market, and we provided money for them to do that. The bet was a bad one and now we need to ensure the investors suffer the consequences.’
When quizzed as to whether he thought the victims of Storm had any legal claims to make, de Havilland said, ‘Sure. Against Emmanuel and Julie Cassimatis. I wish them the best of luck getting money out of those two clowns. Storm investors lost money for two reasons – their own stupidity and the alleged misconduct of the Cassimatis’. Why am I being asked to compensate them?’
De Havilland has coined a new term for the combination of moral hazard, blind stupidity and political pressure he says is involved in the whole debacle – stormonomics.
‘Stormonomics is the economic system whereby you can take any risk you want and if you lose you simply sue the nearest company around with any money, using the media to press your case. It is economics without risk and without consequences of failure. You create a gravy train for the legal fraternity and ensure the management teams of anyone you sue understand the public pressure they are under. It is a triumph of the minority and it is a disaster for the rest of us that this can be allowed to happen. We cannot allow our economy to fall to stormonomics.’
De Havilland denied accusations of attempting to raise publicity ahead of the launch of his new book.
