Freddie Mac Wins Dismissal of Proposed Class-Action Investor Lawsuit
The Federal Home Loan Mortgage Corp. (FMCC) won dismissal of a proposed class-action lawsuit in which pension funds claimed the company misled shareholders about financial risks.
U.S. District Judge John Keenan in New York dismissed the case in a written opinion, saying the plaintiffs failed to show that Freddie Mac made misstatements. The judge said the plaintiffs could file a new complaint in the next 60 days.
“Plaintiffs have failed adequately to plead the existence of actionable misstatements or omissions of fact relating to Freddie Mac’s exposure to non-prime mortgage loans or its capital adequacy,” Keenan said in his opinion, dated March 30.
Central States, Southeast and Southwest Areas Pension Fund and National Elevator Industry Pension Plan sued Freddie Mac and its former top executives in 2008 on behalf of shareholders who charged that the company’s “misrepresentations resulted in inflated share prices.” After the shares declined, Freddie Mac, which was chartered by the U.S. Congress to provide funds to mortgage lenders, was seized by the U.S.
“We are, of course, disappointed with the court’s ruling, but we are confident that we will ultimately prevail,” David George, a plaintiff’s lawyer, said in an e-mail. “We will be filing an amended complaint.”
Freddie Mac, based in McLean, Virginia, had no comment beyond a statement today announcing the court’s decision, a spokesman, Michael Cosgrove, said in an e-mail.
Also named as defendants were Richard Syron, the former chief executive of Freddie Mac; Anthony Piszel, the former chief financial officer; and Patricia Cook, the former chief business officer.
The case is Kuriakose v. Federal Home Loan Mortgage Corp., 08-07281, U.S. District Court, Southern District of New York (Manhattan.)
To contact the reporter on this story: Don Jeffrey in New York at djeffrey1@bloomberg.net.
To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net
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