Annual report 2006 - Dexia.com

GENERAL INFORMATION
MANAGEMENT REPORT
COMPTES CONSOLIDÉS
COMPTES SOCIAUX
Dexia Bank considers having serious grounds for contesting
these charges.
Several parties have introduced a claim for damages in the
criminal proceedings. The largest civil party is Deminor, representing
– according to its website – 11,000 shareholders
of LHSP, with an aggregate amount of alleged damages of
approximately USD 200 million in principal. There are about
400 other individuals that have reported themselves as civil
parties. It is likely that not all of the potential applicants have
already introduced their claim; those who have done so, have
in most cases not yet stated and or provided evidence of the
alleged losses.
It should be added that in January 2003, Dexia Bank has itself
lodged a complaint with the examining magistrate against
persons unknown, claiming compensation.
As yet it is very difficult to give an opinion on the likely outcome
of the proceedings or on the level of the financial risk
which Dexia Bank would face, if the charges brought against
it were upheld. Dexia Bank underlines its innocence in this
matter and contests the charges brought against it.
4.2.4. Civil proceedings against Dexia Bank in
Belgium
4.2.4.1. LHSP receivers’ claim
In July 2005, the receivers of LHSP filed an action against
twenty-one parties, including Dexia Bank, for an indemnity
against the net liabilities of LHSP in bankruptcy. According to
the receivers’ provisional assessment of the claim, the claim
would amount to approximately EUR 439 million. This claim
is not likely to have any development until after the end of
the criminal proceedings because of the principle “le criminel
tient le civil en état”.
4.2.4.2. Claim by individuals
Certain civil claims have been filed by groups of investors in
LHSP shares against various parties, including Dexia Bank. The
main claim was filed by Deminor on behalf of 4,941 investors.
The claimants seek damages for their losses, which have not
been assessed yet. These claims, to a large extent duplicative
of the claims introduced in the criminal proceedings, are not
likely to have any development until after the end of the criminal
proceedings because of the principle “le criminel tient le
civil en état”.
4.2.5. Civil proceedings against Dexia Bank in the
United States
4.2.5.1. LHSP Litigation Trustee’s claim
In 2005 the Litigation Trustee for the LHSP Litigation Trust
filed an action against Dexia Bank. The Litigation Trustee seeks
to recover damages from Dexia Bank for entering into loan
transactions, which he claims amount to aiding and abetting
breaches of fiduciary duty by the LHSP Management. He also
seeks to disallow or subordinate Dexia’s claims in the US bankruptcy
proceedings. This action is, essentially, a duplication of
the above-mentioned LHSP receivers’ claim.
4.2.5.2. Claims by investors
Following the announcement of Dexia Bank’s indictment in
Belgium, several civil claims were introduced in the United
States against Dexia SA and Dexia Bank arguing that Dexia
Bank is liable for the losses suffered by LHSP shareholders.
Dexia Bank disputes the merits of all of these claims.
a. Class actions
Two class actions have been brought on behalf of investors
in LHSP shares against Dexia Bank and a host of other parties
named in prior litigation, including the principals of LHSP.
• NASDAQ class action
The first class action was served on Dexia Bank in February
and March 2004 in the name of three individuals acting for
themselves as well as on behalf of a class of purchasers of
LHSP shares on the NASDAQ stock market between August
19, 1998 and November 8, 2000.
Although Dexia Bank is of the opinion that none of the claims
of the plaintiffs is well-founded, Dexia Bank has, in view of
the large costs of defence and the uncertainty about the outcome
of the proceedings, decided to conclude a settlement
agreement with the NASDAQ class plaintiffs. To this end, a
memorandum of settlement has been concluded on February
9, 2007, which in its principal terms provides for the payment
by Dexia Bank of an amount of USD 60 million in exchange
for an unconditional release of all claims against Dexia SA and
Dexia Bank and any of their past or present affiliates, officers
and employees, relating to purchases or sales of LHSP common
shares on the NASDAQ Stock Market during the period
from August 19, 1998 through and including November 8,
2000 (the “class period”) or to purchases of call options to
acquire LHSP common shares or sales of put options related
to LHSP common shares on any United States-based options
exchange during the class period by all investors who will
participate in and/or be bound by the settlement agreement,
without any recognition on behalf of Dexia SA or Dexia Bank
of any wrongdoing or liability. This settlement is still subject
to court approval.
• EASDAQ class action
In October 2005, a second class action was filed against Dexia
Bank on behalf of a class of purchasers of LHSP shares on the
EASDAQ stock market between April 28, 1998 and November
8, 2000.
On February 12, 2007, the District court of Massachusetts
found that the US courts were not the appropriate forum to
litigate this action and consequently dismissed the claim. The
EASDAQ plaintiffs have thirty days from the date of the decision
to lodge an appeal.
b. Transactional proceedings
Three separate claims for damages have been filed against
Dexia Bank by US shareholders that had acquired LHSP shares
through major corporate transactions. One claim was filed by
Stonington, the former owner of Dictaphone, a US company
acquired by LHSP in May 2000 in exchange for LHSP shares
valued at the time at USD 490 million. The two other claims
were filed by James and Janet Baker, who had received in the
spring of 2000 LHSP shares valued at that time at approxi-
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Dexia / Annual Report 2006