Subject: Minibond US Class Action Plaintiffs Appeal Order Excluding Minibond Investors from Arbitration Proceedings

Date: Tue, 29 Mar 2011 20:41:55 -0700
From: PatrickD@rgrdlaw.com


FROM: ROBBINS GELLER RUDMAN & DOWD LLP, COUNSEL TO THE US MINIBONDS CLASS ACTION PLAINTIFFS

The Minibond investors in the US Class Action today filed the attached appeal of the Order from the Bankruptcy Court excluding Minibond investors from participating in the arbitration and resolution of Minibond investors' claims between Lehman and HSBC, the Minibond program architects.

The US Class Action plaintiffs and their counsel have appealed the exclusion of the Minibond investors from the arbitration process because the Court improperly permitted the two perpetrators of the Minibond scheme, HSBC and Lehman, to negotiate solely between themselves how to allocate Minibond investors' cash and collateral. The US Class Action plaintiffs had originally warned that HSBC and Lehman were conflicted and would not fairly represent the interests of Minibond investors. Unfortunately, the US Class Action plaintiffs were correct in their prediction with the result being HSBC and Lehman retaining tens, possibly hundreds of millions of US dollars of Minibond investors' collateral as fees, payments and retained termination payments - none of which payments HSBC and Lehman are entitled to retain given their complicity in creating the deceptive and misleading Minibonds program that has inflicted hundreds of millions of dollars US of losses on investors.

A copy of the earlier statement summarizing the history and grounds for the appeal is below.



PREVIOUS MARCH 2011 STATEMENT AND RELEASE:

Robbins Geller represents Minibond investors who have, for the past two years, prosecuted claims against HSBC Bank USA, N.A. ("HSBC"), the trustee for the Minibond program, and Lehman Brothers Special Financing, Inc. ("LBSF" or "Lehman"), the creator and arranger of the Minibonds program and counter-party to the transactions underlying the various series of Minibonds. The action on file against HSBC and LBSF is known as Wong v. HSBC Bank USA, N.A. et al., US Bankruptcy Court, Southern District of New York, Adversary Proceeding No. 09-01120 (the " US Class Action").
Over the past two years, the US Class Action plaintiffs have fought vigorously and with great determination to hold HSBC and LBSF responsible for the hundreds of millions of dollars of losses inflicted on them through a deceptive scheme created, marketed and overseen by HSBC and LBSF. The US Class Action plaintiffs have won significant victories and rulings from the US District Court appealing orders by the Bankruptcy Court against the plaintiffs and have persevered in pursuing their claims.

In the past few months, LBSF sought, with HSBC's support, and won again from the Bankruptcy Court, an order to EXCLUDE the US Class Action plaintiffs from participating in any arbitration of the Minibond investors' claims. The effect of the order from the Court was to permit LBSF and HSBC to conduct all discussions of any proposed resolution of the Minibond investors' claims behind closed doors and without any input or scrutiny from the very parties whose financial interests are most at stake - the individual Minibond investors , and specifically the US Class Action plaintiffs . In objecting to the Minibond investors being excluded from these discussions, the US Class Action plaintiffs argued that LBSF itself conspired with HSBC to fraudulently create and market the entire Minibond program and that to permit the two perpetrators of the fraud - HSBC and LBSF - to negotiate with the Minibond investors' money would compound the injustice and injury that the Minibond investors have suffered.

Unfortunately, the US Class Action plaintiffs' prediction has now come true. Even from the scant details that have been released thus far on the proposed settlement, it appears that HSBC will receive at least US$85 million in fees (over HK$650 million), and possibly as much as US$120 million or HK$950 million, from the Minibond investors. According to the US Class Action suit, this minimum payment of HK$650 million HSBC from Minibond investors is on top of and in addition to the millions in HK$ fees that HSBC received from establishing and perpetrating the Minibonds fraud on investors in the first instance.

Additionally, it appears that LBSF itself may retain a significant amount of the collateral underlying the Minibonds as part of the settlement. The exact amount is unclear from the details thus far revealed, and Minibond investors certainly deserve a detailed accounting of those payments to LBSF. But even if the amount LBSF retains is "only" 15% of the Minibond collateral, that amounts to a payment to LBSF from Minibond investors of US$225 million or HK$1.7 billion. This is, of course, on top of the tens of millions of dollars of fees and profits that LBSF itself generated from perpetrating the fraud on the Minibond investors in the first instance.

Patrick Daniels, a managing partner of Robbins Geller Rudman & Dowd LLP ("Robbins Geller"), the US law firm representing the US Class Action plaintiffs, blasted the settlement: "This appears to be yet another sweetheart deal negotiated in the dark and behind closed doors. Tens of thousands of Minibond investors, many of whom are retirees, are once again paying for HSBC's and Lehman's complicity. The two perpetrators of this outrageous fraud, HSBC and Lehman, have rubbed salt into the wounds of Minibond investors by potentially extracting hundreds of millions of dollars in additional fees and expenses from Minibond investors, while avoiding the consequences and any further scrutiny of their actions. We will be demanding more detailed information and answers to critical questions that have been raised by the way in which this supposed settlement came about and a full accounting of every penny of the Minibond investors' collateral."

In a statement supporting the settlement, HSBC attempted to justify the settlement by stating that the "agreement allows...[HSBC] to avoid the risks and uncertainty of prolonged, complex and costly litigation with Lehman Brothers and other parties." In response, Mr. Daniels pointed out that HSBC has not appeared to have filed one scrap of paper in any court in the US or in England, where other investors have brought, and won, actions related to the securities underlying the Minibonds program. "They gave up the fight without even attempting to assert the Minibond investors' claims - as the US Class Action plaintiffs have done for the past two years - and for that HSBC expects US$85 million. I guess it's still pretty good business to be a Fat Cat banker."