* Mortgage giant accused of hiding subprime, capital risks
* Judge says proof of intent to mislead is lacking
* Shareholders not permitted to amend lawsuit
By Jonathan Stempel
Sept 26 A federal judge has again dismissed a
lawsuit accusing Freddie Mac of misleading
shareholders by understating its subprime mortgage exposure and
overstating its capital strength ahead of the 2008 financial
U.S. District Judge John Keenan in Manhattan said the
allegations made in an amended lawsuit failed to show that
Freddie Mac officials, including former Chief Executive Richard
Syron, intended to mislead shareholders, or withheld significant
information from them.
He also said Freddie Mac had made a "bevy of truthful
disclosures" about its credit and risk exposures during the
period covered by the lawsuit, including over loans it
guaranteed and its activities in nontraditional markets.
"It defies logic to conclude that executives who are seeking
to perpetrate fraudulent information upon the market would make
such fulsome disclosures," Keenan wrote.
Shareholders led by the Illinois-based Central States,
Southeast and Southwest Areas Pension Fund had accused Freddie
Mac of hiding its risks after revealing a $2 billion quarterly
loss on Nov. 20, 2007.
The lawsuit covers losses by investors in Freddie Mac common
and preferred shares from that date until Sept. 7, 2008, when
U.S. regulators seized Freddie Mac and larger rival Fannie Mae
and put them in a conservatorship under the Federal
Housing Finance Agency.
Lawyers for the plaintiffs did not immediately respond to
requests for comment.
Keenan had in March 2011 dismissed an earlier version of the
lawsuit, which was first filed in August 2008, but given the
plaintiffs a chance to amend their complaint. He refused on
Wednesday to give them another chance.
The shareholder lawsuit is separate from a civil fraud
lawsuit that the U.S. Securities and Exchange Commission has
been pursuing against Syron and other former Freddie Mac
officials. Defendants in that case have denied wrongdoing.
The case, whose title has a different named plaintiff, is
Kuriakose v. Federal Home Loan Mortgage Corp et al, U.S.
District Court, Southern District of New York, No. 08-07281.