San Mateo County has filed a lawsuit against Lehman Brothers, in order to recoup their $155 million loss, including $25 million of district finances.
The suit against Lehman Brothers, which went bankrupt in September, was filed Sept. 13 in San Francisco Superior Court, but was just recently authorized by the San Francisco Board of Supervisors in a closed session Oct. 23.
After Lehman Brothers Holdings Inc. filed for bankruptcy, the San Mateo County Community College District took one of the largest financial hits in its history. Because the district invests its money in the county pool which is managed by the San Mateo County Treasurer, anything that was lost due to the Lehman bankruptcy will have a significant impact on the investors, including the San Mateo Community College District.
The lawsuit would only impact the district if losses were recovered, said Jim Keller, executive vice chancellor for the district.
“Any proceeds would be applied to the deposit holders in proportion to their holdings at the time of the loss,” Keller said. “The lawsuit will impact students to the extent that funds are recovered and can be applied to the funds and accounts experiencing the loss, including bond funds, general funds, bookstores, and student body funds.”
The lawsuit filed against Lehman Brothers states that executives deceived investors while trying to make them believe that Lehman wasn’t in trouble, when in fact, the company was on the verge of collapse.
“The county, like the district, wants to recover as much of their loss as possible,” as well as minimize any damage that the bankruptcy may have caused Keller said.
In the midst of an economic slump, it may be hard to recover any financial losses according to Kathy Blackwood, the chief financial officer for the district.
“The county is trying every avenue possible to get their money back,” Blackwood said. The lawsuit will find out if there was any negligence on Lehman’s part, and whether or not some members practiced bad business like selling their personal stocks before the bankruptcy, Blackwood said.
According to Blackwood, it is not unusual to sue a failed business, or more correctly, sue the executives for any misconduct. Whatever the outcome, both Keller and Blackwood agree that there will be some financial loss.
“Even if the county sues, it doesn’t necessarily mean all of the money will be recovered,” Blackwood said. “We’ll have to wait and see.”
The impact to Skyline students is yet to be determined according to Jeff Westfall, a professor at Skyline, and a member of the College Budget Committee. Westfall’s main concern is Skyline students.
“I have full confidence in the district’s professionalism in this manner and I know that Skyline is completely committed to ensuring that the students are not affected by [the lawsuit],” Westfall said. “Our [College Budget Committee] discussions have been all about what works for the students because we really do care about them.”