The original class action alleging violations of the federal securities law against the Federal Home Loan Mortgage Corporation (NYSE:FRE) ("Freddie Mac" or the "Company") and certain of its officers and directors on behalf of purchasers of Freddie Mac securities from November 21, 2007 through August 5, 2008 was filed on August 15, 2008.
The Complaint alleges that the Company misled investors as to the soundness of the Company's mortgage portfolio, its underwriting standards and the adequacy of its capital. It took on massive exposure to subprime and other non-traditional risky loans and under-reserved for bad loans and sub-prime investments leading to delayed asset write-downs. Freddie Mac common shares which traded in the $30 range in late 2007 have been decimated by the subsequent revelations of the
Company's losses and write-downs, so that Freddie Mac common shares are now trading below $6, wiping out hundreds of millions of dollars in shareholder value. Due to the continuing deteriorating situation, there have been suggestions that a government bail-out might be necessary.
On November 24, 2008, Judge John F. Keenan signed the Opinion and Order #96784 granting the motion to appoint the Central States Southeast and Southwest Areas Pension Fund as lead plaintiff and approved lead plaintiff’s choice of Coughlin Stoia Geller Rudman & Robbins LLP as lead counsel. In February 2009, orders were entered allowing for a motion to stay. On May 19, 2009, the lead plaintiff filed an Amended Consolidated Complaint. On February 24, 2010, the defendants filed a motion to dismiss the Amended Consolidated Complaint.
According to the Opinion and Order signed by Judge John F. Keenan on March 30, 2011, Because Plaintiffs have failed adequately to plead the existence of actionable misstatements or omissions of fact relating to Freddie Mac's exposure to non-prime mortgage loans or its capital adequacy, and because they have failed to plead loss causation with respect to their claims relating to Freddie Mac's internal controls and financial statements, Freddie Mac's and the Individual Defendants' motions to dismiss Plaintiffs' Section 10(b) of the '34 Act and SEC Rule 10 b-5 claims are both granted. Additionally, because the validity of a Section 20(a) claim against a "controlling person" depends on the existence of a valid claim against the allegedly controlled person, and because Plaintiffs have failed to state a claim against Freddie Mac, the Individual Defendants' motion to dismiss Plaintiffs' claims under Section 20(a) of the '34 Act is granted. Plaintiffs are granted sixty (60) days from the date of this Opinion & Order to file a Second Amended Complaint.
On July 18, 2011, the plaintiffs filed Second Amended Consolidated Class Action Complaint.
On September 24, 2012, the Court issued an Order granting the Defendants' motion to dismiss the Second Amended Complaint with prejudice. The Clerk of Court was directed to close this case.