Lehman Bros.' financial crisis burns Asian bond investors

HONG KONG -- Retired civil servant Coral Chan and her husband just wanted a little extra income to supplement their pensions.

So they sank $150,000 in savings into what looked like a safe investment: a bond — known as an equity-linked note — tied to blue-chip Hong Kong and Chinese stocks. If the stocks did well, Chan and her husband would get a generous interest payout. In the worst-case scenario, they might lose out on interest payments — but would end up holding some blue-chip shares.

Or so they thought. Their nest egg splattered in September, collateral damage in Wall Street's financial crisis.

The note that Chan had bought from ABN Amro bank had been created, distributed and managed by the Wall Street investment bank Lehman Bros. When Lehman sought bankruptcy-court protection in September, the note vanished into a black hole along with other, similar Lehman investment products. She doesn't know if she'll ever recover any of her money.

Chan, 55, has plenty of company. Lehman's meltdown has left victims across the Pacific Ocean. In Hong Kong alone, 43,700 people bought $2.6 billion worth of Lehman investment products, some of which might now be worthless.

"It's broken our hearts," Chan says.

The debacle has turned quiet retirees such as Chan into placard-waving protestors, claiming they were duped into making risky investments and demanding their money back — either from the banks that sold the investments or the governments that let them. Even in somnolent Singapore, hundreds of angry investors rallied at a public park on Nov. 1.

"The banks were telling lies," says Grace Lau, 53, a friend of Chan's who has nearly $130,000 tied up in Lehman investments. "We were persuaded that the blue-chip stocks were safe. We didn't know anything. We were like children."

The Lehman products included equity-linked notes and so-called mini-bonds that invested in complicated products, such as interest rate swaps and collateralized debt obligations. "It's almost gambling. It's highly risky," says Johannes Chan, a Hong Kong University law professor.