Judge John Keenan said the Central States, Southeast and Southwest Areas Pension Fund, and National Elevator Industry Pension Plan failed to adequately prove the misrepresentation or misstatement relating to Freddie Mac’s exposure to non-prime mortgage loans, accuracy of financial reporting and its capital adequacy. “These claims fail because plaintiffs have not plausibly alleged that these misrepresentations proximately caused them economic harm,” Keenan wrote, according to Reuters.
The judge granted the plaintiffs sixty days to file an amended complaint.
The news report said the pension funds claimed the mortgage finance giant had materially misrepresented its exposure to risky mortgage products, leading to investment losses. They said in their lawsuit that following Freddie Mac’s disclosure of a $2 billion loss for the third quarter of 2007, the company fudged its financial situation, leading to inflated share prices, which eventually declined as Freddie Mac’s dire financial situation became clear to the market.The Case is in re: Jino Kuriakose, individually and on behalf of all others similarly situated vs Federal Home Loan Mortgage Corp, Case No. 08-07281, U.S. District Court, Southern District Of New York.