Ohio pension fund accuses Freddie Mac of fraud
WASHINGTON Jan 23 (Reuters) - An Ohio pension fund filed an investor class action lawsuit against Freddie Mac, accusing the mortgage finance giant of securities fraud for failing to disclose risks from its investments in the subprime mortgage market.
Ohio Attorney General Marc Dan, who filed the suit in U.S. District Court, the Northern District of Ohio, on Tuesday said Freddie Mac had "secretly and intentionally participated in one of the largest housing investment deceptions in modern U.S. economic times."
According to Dann, the Ohio Public Employees Retirement System suffered losses of up to $27.2 million as a result of the fraud.
Attorney General Marc Dann said in a statement the company improperly bought risky home loans that fell sharply in value and led to huge losses for Freddie Mac.
Dann said Freddie Mac, a private company that holds a federal charter, 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."
A spokesman for Freddie Mac declined to comment.
The suit was filed on behalf of the Ohio Public Employees Retirement System and all other purchasers of Freddie Mac stock between Aug. 1, 2006, and Nov. 23, 2007. The pension fund is seeking to be the lead plaintiff in the class action suit.
Freddie Mac shares were trading at $31.13 on Wednesday, down from a high of more than $60 when the U.S. mortgage crisis began to unfold in the middle of last year.
Freddie Mac as well as Wall Street's biggest banks have taken multibillion dollar losses in recent months as risky subprime loans have failed. While Freddie Mac held $152 billion of risky loans at the end of September, it was a relatively minor player in the subprime loan market.
The Ohio complaint seeks damages against Freddie Mac and its top executives, including Chief Executive Officer Richard Syron, for allegedly understating the company's potential losses to subprime loans.
The attorney general has been investigating various aspects of the housing bust that hit Ohio particularly hard.
Dann said in July he was investigating major credit rating agencies, accountants and investment banks and he has filed suits against mortgage brokers, lenders and appraisers.
In addition to the Ohio case, Dann said he filed a request for the Ohio Public Employees Retirement System to become the lead plaintiff in a class-action suit of Freddie Mac shareholders making similar claims in a suit filed recently in a federal court in New York. (Reporting by Patrick Rucker; Editing by Leslie Adler)
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