Ex-Freddie execs lose bid to toss SEC lawsuit
NEW YORK, March 29 (Reuters) – Former Freddie Mac chief executive Richard Syron and two other one-time executives lost their bid to escape a U.S. regulator’s lawsuit accusing them of misleading investors about the company’s exposure to risky mortgage loans.
U.S. District Judge Richard Sullivan in Manhattan partially granted but otherwise denied the defendants’ motion to dismiss the case, one of the biggest enforcement actions brought against executives spilling out of the financial crisis.
Sullivan in his Thursday ruling sided with the SEC, finding the lawsuit’s allegations supported a plausible inference that Syron and Patricia Cook, Freddie Mac’s former chief business officer, misrepresented the company’s subprime exposure.
He also rejected the defendants’ contention even if Syron and Cook verbally misrepresented Freddie’s exposure, investors could have looked to detailed quantitative information to calculate its subprime exposure.
“In this case, the Court cannot conclude that no reasonable investor could have found the alleged misrepresentations and omissions to be material in light of the quantitative disclosures,” Sullivan wrote.
Copy of the opinion below…