The employees filing the lawsuit in the U.S. District
Court in Los Angeles are seeking class action status to
stand for 3,300 participants in the company retirement plan
and another 1,700 of those invested in the Employee Stock
Ownership Plan (ESOP).
According to the AP, the complaint alleges that directors at the company began engaging in irresponsible lending practices as early as 2003 in an effort to boost the company’s stock – a plan that backfired when a large number of subprime borrowers began to default on their loans.
In fact, Fremont had to exit the subprime mortgage
business in March after federal regulators alleged that one
of the company’s subsidiaries was making loans without
assessing borrowers’ ability to repay the loans.
When that happened, employees who had money in company stock ownership and plans lost millions. According to the complaint, the directors at the company should have been aware that company stock was not a good investment.