For more stories like this, sign up for the PLANSPONSOR NEWSDash daily newsletter.
Administration January 24, 2008
Ohio Slaps Freddie Mac with Subprime Lawsuit
January 24, 2008 (PLANSPONSOR.com) - With Ohio's
public pension fund suffering losses of up to $27.2 million
from subprime mortgage-related investments, the state of Ohio
has accused mortgage finance giant Freddie Mac of a massive
investor fraud.
Reported by Fred Schneyer
The lawsuit accused Freddie Mac of not properly disclosing potential risks from its subprime mortgage investments, Reuters reported. Freddie Mac executives fraudulently denied having a significant amount of subprime-related holdings even though they actually had “substantial involvement in the subprime industry,” the suit said.
In fact, the suit charged, $150 billion of its mortgage portfolio was riskier than investors were previously told. As a result, Freddie Mac incurred a record $2 billion loss, revelations of which caused a 29% drop in the organization’s stock price.
With the Ohio Public Employees Retirement System asking to be named as lead plaintiff, the suit is seeking certification as a class action to represent the pension program and all other buyers of Freddie Mac stock between August 1, 2006, and November 23, 2007.
Wall Street banks have also taken multibillion dollar losses in recent months as risky subprime loans have failed (See Suit: Citi Stock Drop Cost 401(k) Participants $1.3B ).
The Ohio complaint seeks damages against Freddie Mac and its top executives, including Chief Executive Officer Richard Syron.
The Ohio lawsuit is here .