US - The Federal Home Loan Mortgage Corporation (Freddie Mac) has won the dismissal of a putative class action securities lawsuit from pension funds who believed the company misled shareholders about financial risks.
Central States, Southeast and Southwest Areas Pension Funds and National Elevator Industry Pension Plan sued Freddie Mac and its former top executives in 2008 on behalf of shareholders who claimed the company's "misrepresentations resulted in inflated share prices".
After the shares declined, Freddie Mac, which was chartered by the US Congress in 1970 to provide funds to mortgage lenders, was seized by the US.
Judge John Keenan of the US District Court for the Southern District of New York granted Freddie Mac's motion to dismiss all claims asserted against Freddie Mac in the putative securities fraud class action after finding the alleged misstatements and omissions not actionable. The claims regarded Freddie Mac's involvement in the subprime and Alt-A mortgage markets.
The judge said the plaintiffs failed adequately to plead that Freddie Mac's disclosures on those issues were either false or misleading and also dismissed alleged misrepresentation claims relating to Freddie Mac's capital adequacy, core capital, internal controls and underwriting processes. The court granted the plaintiffs 60 days to file an amended complaint, if they choose to do so.
Neither the plaintiffs or Freddie Mac were available for comment.
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