Ohio Attorney General Sues Freddie Mac
As if it wasn't enough that the city of Cleveland is suing 21 mortgage lenders for being a public nuisance, Ohio AG Marc Dann stepped into the fray Wednesday by suing none other than Freddie Mac. Alleging that the GSE "secretly and intentionally participated in one of the largest housing investment deceptions in modern U.S. economic times," Dann's office filed a securities fraud class action lawsuit in federal court in Youngstown, Ohio. The action was filed on behalf of the Ohio Public Employees Retirement System (OPERS), whose investment in securities backed by subprime mortgage loans could lead to losses as high as $27.2 million, according to a press statement released Wednesday by Dann's office. 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. In addition to Freddie Mac and its officers, the lawsuit seeks to hold Freddie Mac committee directors personally responsible for what the AG's office claimed was "recklessness and secrecy about Freddie Mac's investments and resulting losses in the subprime housing mortgage industry." "I would like to commend the trustees and staff at OPERS for supporting my effort to hold Freddie Mac accountable for the role the company and its top executives played in bilking investors and fueling the foreclosure crisis that is destroying neighborhoods across our state and the entire nation," Mr. Dann said. "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. 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." In addition to initiating the Ohio case, the Ohio AG's office said it had filed OPERS' request to become the lead plaintiff in a similar case recently filed in federal court in New York.