YOUNGSTOWN, Ohio (TDB) -- A federal judge in Ohio has selected the state's retirement system for government workers -- which lost between $17 million to $26 million -- as lead plaintiff in a potential class-action against Freddie Mac over soured investments in subprime mortgages. U.S. District Judge John R. Adams issued the order today after determining OPERS, "has the largest financial interest in this litigation." The lawsuit accuses senior executives and board members of the Federal Home Loan Mortgage Corp., which is widely known as Freddie Mac, of violations of federal securities laws. The complaint is designed as a class-action on behalf of investors who purchased common stock between August 2006 and Nov. 23, 2007. It contends the stock (ticker symbol FRE on NYSE) traded at artificially high prices because subprime risks were hidden.
The court ruling Thursday also appointed class counsel. Cincinnati lawyer Stan Chesley's firm, Waite Schneider Bayless & Chesley Co, LPA was named co-lead counsel with Chitwood Harley Harnes LLP. Chesley is a prominent Ohio Democrat and has been involved in major litigation across the U.S. over the years. The Chesley firm is is acting as special counsel for Ohio Atty. Gen. Marc Dann's office. The case is Ohio Public Employees Retirement System v. Federal Home Loan Mortgage Corp, No. 4:08-cv-00160 Northern District of Ohio, Eastern Division. It alleges that Freddie Mac did not properly advice stockholders about its subprime exposure:
"In November 2007, Freddie Mac was finally forced to disclose the truth abut its significant exposure to the subprime crisis when it announced that its subprime exposure had resulted in a record $2 billion loss. As a result of these revelations, the price of Freddie Mac common stock plummeted by 29%, with common stock shareholders losing over %6.6 billion in market capitalization in one day."
OPERS has 920,000 members who work for about 3,700 government agencies in Ohio. Its assets exceed $77 billion and it is the 14th largest U.S. retirement system.