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Subprimed Melville selects sued advisor


After its $14.98 million loss from bad Collateralised Debt Obligations investments during the subprime mortgage fiasco, the City of Melville recently selected a Perth investment advisor reportedly sued for $6.8 million after advising a company that also suffered a massive CDO hit.

Perth-based advisor Oakvale Capital was one of three companies invited by City of Melville staff to quote for the $3000-a-month investment advisor job.

The tender called for firms to provide valuation and reporting services on the city’s investment portfolio, including its substantial CDO exposure.

A council evaluation panel identified Oakvale as the preferred supplier, noting it had more than 25 local authority clients and that its Perth location was desirable.

However, before the contract was signed, the city learned of a reported multimillion dollar settlement between Oakvale and stock exchange listed Victorian technology company Ceramic Fuel Cells Ltd.

According to an Australian Financial Review article of August 17, the $6.8 million out of court settlement followed a multimillion CDO loss suffered by Ceramic Fuel Cells.

The settlement was reportedly reached after the case was heard in the Federal Court but before a judge’s decision was made.

A document tabled at a special council meeting convened this week to approve an alternative investment advisor reveals that after the panel selection, Oakvale and the city exchanged letters before agreeing not to proceed.

On the advice of global financial services company Lehman Brothers, which was at the centre of the subprime meltdown, Melville invested heavily in CDOs in the leadup to the global economic crisis.

It was CDO investments that were worst affected during the crisis.

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