The original Complaint charges that Defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of material misrepresentations to the market during the Class Period, thereby artificially inflating the price of NAB securities. Specifically, the Complaint alleges that NAB's subsidiary HomeSide knowingly used unreasonably optimistic valuation methodologies in connection with financial modeling of its $180 billion mortgage servicing portfolio. As a result, the Company's financial condition was materially overstated during the Class Period. These unreasonably optimistic valuation methodologies were revealed on September 3, 2001 when NAB announced that it would write off $1.75 billion due to problems at HomeSide. In reaction to this news, when trading resumed on September 4, 2001, NAB's ADRs fell to $78.40 from $88.64.
NOTE: The action seems likely to be limited to US investors, who primarily hold NAB securities in the form of American depositary receipts.
As disclosed by Company’s FORM 20-F for the fiscal year ended September 30, 2005, on August 29, 2003, a civil class action complaint was filed in the US District Court, Southern District of New York, against the Group and others for alleged violations of the US federal securities law relating primarily to disclosure concerning the valuation of the mortgage servicing rights held by HomeSide US (sold in October 2002). The complaint failed to specify any quantum of damages. The plaintiffs in the complaint filed their consolidated amended class action complaint on January 30, 2004, and the Group moved to dismiss the consolidated amended class action complaint on March 11, 2004. It is anticipated that the court will rule on the motion to dismiss during the 2006 year.
According to a press release dated October 27, 2006, in an order entered on October 26, 2006, the Judge presiding over the litigation dismissed the Complaint, holding that the Court lacked subject matter jurisdiction over the claims of foreign purchasers of NAB securities purchased on non-U.S. exchanges. The Court also ruled that the plaintiff who purchased NAB ADRs did not sustain damages and dismissed the claims of ADR purchasers. The Court, however, expressly "granted leave to substitute a lead domestic plaintiff and to otherwise amend the pleadings with respect to ADR purchasers only." This means that someone who purchased NAB ADRs between April 1, 1999 and September 3, 2001, inclusive, and lost money on the investment, may seek to be substituted as a plaintiff so that the action can continue. Any such substitution must be accomplished soon by filing the appropriate motion papers with the Court.
According to the docket, Judge Barbara S. Jones allowed plaintiff's 60 days from the October 27, 2006 dismissal to file an Amended Consolidated Complaint with a substitute lead domestic plaintiff and to otherwise amend the pleadings with respect to ADR purchasers only. On December 26, 2006 plaintiffs filed their Amended Consolidated Complaint. On January 16, 2007 Judge Jones then entered her Final Order and Judgment voluntarily dismissing with prejudice the case against National Australia Bank. The plaintiffs have since filed for appeal.
On November 17, 2008, the Court entered the certified copy of the Mandate from the U.S. Court of Appeals, affirming the judgment of the District Court. However, on December 21, 2009, the Court entered the U.S. Court of Appeal Order Reinstating the Appeal. According to the Order, the mandate in this case is recalled, restoring jurisdiction to this Court. On August 9, 2010, the judgment of the District Court was once again affirmed by the certified copy of the Mandate from the Second Circuit Court of Appeals.