COLUMBUS, Ohio -- Ohio's aggressive attorney general has sued mortgage lender Freddie Mac, accusing the lending giant of defrauding the state's mammoth pension fund by systematically investing in sub-prime home loans.
Attorney General Marc Dann alleges that Freddie Mac, formally the Federal Home Loan Mortgage Corp., "secretly and intentionally participated in one of the largest housing investment deceptions in modern U.S. economic times."
He seeks damages for government employees and other shareholders who receive benefits from the Ohio Public Employees Retirement System, which invested in Freddie Mac. The pension fund's losses as a result of the alleged fraud are estimated at as much as $27.2 million.
Freddie Mac does not comment on pending lawsuits, said spokesman Doug Duvall.
The suit was filed Friday in U.S. District Court in Dann's native Youngstown and announced publicly by Dann late Tuesday. The pension fund was the lead plaintiff in an earlier lawsuit against the government-sponsored Freddie Mac that ended in a $410 million settlement.
In a statement, Dann commended the pension fund's trustees for backing his 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."
Dann said the lawsuit sends "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."
The litigation alleges that Freddie Mac was deeply invested in the sub-prime mortgage industry despite repeated public denials and assurances that it wasn't.
The suit seeks to hold the company's officers and committee directors responsible for what it calls the recklessness and secrecy of its investments and seeks compensation for shareholders in the pension fund who purchased common stock between Aug. 1, 2006, and Nov. 23, 2007.
It specifically names Freddie Mac executives Richard F. Syron, Patricia L. Cook, Anthony S. Piszel, and Eugene M. McQuade, and directors of the company's audit, finance and risk oversight committees. Dann alleges they inflated the company's stock price through false financial statements and other public statements in violation of the federal Securities Exchange Act and the rules of the U.S. Securities and Exchange Commission.
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