Lehman's US arm pulls plug Local councils that lost millions on investments made through Lehman Brothers have suffered a major setback, after the US arm of the failed bank blocked a deal that would have delivered the investors up to $210 million. Dozens of councils, charities and churches have been embroiled in a long-running legal action against the investment bank over highly-complex debt securities sold by it and its Australian predecessor, Grange Securities, before the bank collapsed in 2008. The AAA-rated products plunged in value, inflicting hefty losses. Earlier this year, the saga appeared to be reaching a conclusion when the clients arrived at a tentative agreement with liquidators and other creditors, including Lehman Asia, for up to $210 million, or 50¢ in the dollar, to be returned to clients. However, Lehman Asia assigned its creditor rights recently to a US arm of Lehman Brothers, which opposed the proposal at a creditor meeting on Wednesday. The liquidators decided to adjourn the process, forcing councils and charities back to the negotiating table. IMF (Australia) managing director John Walker, who is representing the councils and charities, said it was a frustrating development for the non-profit organisations that had been pursuing their money for up to seven years. "We feel that it's in our interests that we simply get on with this," Mr Walker said after the meeting. The US companies are not coming to negotiate on a principled basis, it's our understanding that they simply want the money. Philip Hoser, a partner at Jones Day, representing Lehman Brothers Holding Company of the US, would not comment beyond saying: "We are continuing in dialogue with the liquidators." The delay is a blow to councils and charities involved in the claim, and they could face a wait of up to two years to get any money back. Colin Cameron, an executive at City of Swan, a West Australian council leading a class action against Lehman, said it was "very disappointing" that the US arm of Lehman had not provided a reason for its position. "Lehman Asia thought it was appropriate but the New York people have bought up their rights and are trying to stymie it," he said. We will continue to push hard with the liquidator to try to make it a speedy resolution. The two liquidators, Steve Parbery and Marcus Ayres of PPB Advisory, said they had adjourned the meeting to preserve the value of previously-agreed insurance settlements worth $48 million and to give the US arm of Lehman time to review the proposal.