Scott Reimer, a shareholder, said in the complaint filed in U.S. District Court in Manhattan that Freddie Mac, Chief Executive Richard Syron and some other executives did not adequately implement risk control measures to protect the company from acquiring billions of dollars worth of mortgages with poor underwriting standards. "Moreover, the company's procedures for appraisals led to many inflated appraisals, increasing the risk of defaults," it said. "Ultimately, the company has reported billions of dollars in losses, has been mentioned in investigations by the New York attorney general and announced it must raise new capital to meet regulatory requirements."The other claim was publicized by one of the so-called usual suspects in this area, Coughlin Stoia Geller Rudman & Robbins LLP -- a law firm that has sought class-action status on numerous other claims of securities violations among publicly-traded mortgage firms. The full press release is available here and claims "false and misleading statements" by the company's executives prior to its recent earnings report, among other claims.
Freddie Mac Faces Legal Heat Over Losses
In the wake of its market-shaking $2.0 billion loss yesterday, lawyers are moving swiftly to make their own claims -- two separate lawsuits appeared today, one alleging a lack of risk control and the other claiming a violation of securities laws. Both are seeking class action status. Reuters covers one claim, which contains allegations of appraisal fraud: