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Ohio AG sues Freddie Mac over subprime mortgage losses.

Ohio's attorney general announced in January he has filed a multimillion-dollar lawsuit against Freddie Mac, alleging the publicly traded GSE defrauded the state public employee pensioners by hiding billions in subprime mortgage lending losses.

In filing the securities fraud class-action lawsuit in federal court in Youngstown, Ohio, on behalf of the Ohio Public Employees Retirement System (OPERS), Attorney General Marc Dann said Freddie Mac "secretly and intentionally participated in one of the largest housing investment deceptions in modern U.S. economic times."

The lawsuit alleges that despite repeated public denials and assurances to the contrary, Freddie Mac was deeply invested in the subprime mortgage industry and failed to disclose that it was not protecting itself from the billion-dollar risks it incurred. OPERS losses as a result of the alleged fraud could be as high as $27.2 million, said Dann.

"By authorizing me to bring this suit on their behalf, they are protecting the interests of the pension plan, the workers and retirees who depend upon it, and the taxpayers whose hard-earned dollars fund it," said Dann. "And they are also sending a loud and clear message to Wall Street that this type of fraud and manipulation will not be tolerated by the people who live on the Main Streets that are being devastated by what Freddie Mac has done."

Citing the fact it is pending litigation, Freddie Mac did not comment on the Ohio lawsuit.

The complaint alleges that Freddie Mac and its top executives and the directors who served on Freddie Mac's Audit, Finance and Risk Oversight Committees artificially inflated the company's publicly traded common stock through false public financial statements and other public statements, including denials of Freddie Mac's billion dollars of exposure to the subprime mortgage industry.

In addition to Freddie Mac and its officers, the lawsuit seeks to hold Freddie Mac committee directors personally responsible for alleged recklessness and secrecy about Freddie Mac's investments and resulting losses in the subprime housing mortgage industry.
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Title Annotation:Briefing Book
Comment:Ohio AG sues Freddie Mac over subprime mortgage losses.(Briefing Book)
Publication:Mortgage Banking
Date:Mar 1, 2008
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