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Judge Boots Lehman Lawsuit

Schools faulted county for losing $20 million in investments to the doomed financial giant.

A judge has tossed a lawsuit by San Mateo County schools over $20 million in Lehman Brothers investment losses.

San Francisco Superior Court Judge Richard Kramer Thursday affirmed his own , saying the law guarantees the county and former treasurer-tax collector Lee Buffington immunity from civil suits.

Twelve school districts and the county board of education in January, alleging they had flouted standards of prudency by placing so much money with the financial services giant, which at the time was the fourth largest investment bank in the nation.

Defense lawyers argued that San Mateo County had itself been a victim of the "unexpected, catastrophic" event. In all, the Lehman collapse cost county taxpayers $155 million.

When Lehman Brothers filed for Chapter 11 bankruptcy protection in 2008, it was the largest filing in U.S. history, involving $600 billion in assets.

The school districts plan to appeal Thursday's ruling, attorney Farley Neuman told reporters.

In June, Kramer ruled that the districts cannot sue the county due to limitations in state law allowing such suits, giving the plaintiffs a month to respond.

The 12 school districts that elected to join the suit are:

  • Belmont-Redwood Shores School District
  • Burlingame Elementary School District
  • Cabrillo Unified School District (Half Moon Bay)
  • Jefferson Elementary School District
  • Las Lomitas Elementary School District (Menlo Park-Atherton)
  • Menlo Park City Elementary School District
  • Portola Valley Elementary School District
  • Ravenswood City Elementary School District (East Menlo Park)
  • San Bruno Park Elementary School District
  • San Carlos Elementary School District
  • San Mateo Union High School District
  • Woodside Elementary School District
Jack Hickey November 15, 2011 at 12:05 AM
The taxpayers are paying for this frivilous litigation. As of june 30, 2011 the County spent $615,492.70 for outside legal help to fend off the lawsuit by school districts. How much of the taxpayer's dollars did the districts spend?
Peter Loeb November 15, 2011 at 12:44 AM
It's only frivolous litigation if it lacks legal merit. In this case, it appears that 12 school districts believed that their suit had legal merit, so much so that they plan to appeal.
Jack Hickey November 15, 2011 at 01:32 AM
How much of the school district money accrued from premature bond sales? What was their expected return on their investment of that money? It should have been for capital preservation only, not to leverage those assets.
Skip Hilton November 15, 2011 at 06:41 AM
As I understand it, the school districts had no choice and were forced by law to place their bond revenue with the county. The blame must lie with former county treasurer Lee Buffington, along with his then assistant and now successor - Sandie Arnott - who made the poor decision to invest our schools future into a house of cards, despite the protests and sound questioning from several financially experienced school board members (volunteers, not paid civil servants) BEFORE the collapse of Lehman. Shame on all of us for re-electing incompetent officials - even after they have clearly demonstrated their incompetence!
Jack Hickey November 15, 2011 at 06:51 AM
I have seen nothing to support the notion that the school districts were " forced by law to place their bond revenue with the county".

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