Fitch Ratings is facing a A$40 million lawsuit from the liquidator of Lehman Brothers Holdings Inc.'s Australian division for allegedly misrepresenting the risk of synthetic collateralized debt obligations, or CDOs, The Sydney Morning Herald reported.

Ernst & Young's Marcus Ayres said he recently filed a lawsuit in Federal Court, alleging the rating agency used a hidden and password-protected table within its ratings model to give low-risk ratings on synthetic CDOs that were later sold to Australian councils, charities and church groups. The sale of synthetic CDOs and the collapse in their value are widely linked to the global financial crisis and the failure of Lehman Brothers and Lehman Brothers Australia, according to the Dec. 11 report.

A spokesman for Fitch said the rating agency will defend any claim brought against it.