Freddie Mac 2010 Annual Report Download - page 282

Furthermore, certain deferred items reported as other liabilities on our GAAP consolidated balance sheets are assigned
zero value on our consolidated fair value balance sheets, such as deferred fees. Also, as discussed in “Other Assets,” other
liabilities may include a deferred tax liability adjusted for fair value balance sheet purposes.
Net Assets Attributable to Senior Preferred Stockholders
Our senior preferred stock held by Treasury in connection with the Purchase Agreement is recorded at the stated
liquidation preference for purposes of the consolidated fair value balance sheets. As the senior preferred stock is restricted as
to its redemption, we consider the liquidation preference to be the most appropriate measure for purposes of the consolidated
fair value balance sheets.
Net Assets Attributable to Preferred Stockholders
To determine the preferred stock fair value, we use a market-based approach incorporating quoted dealer prices.
Net Assets Attributable to Common Stockholders
Net assets attributable to common stockholders is equal to the difference between the fair value of total assets and the
sum of total liabilities reported on our consolidated fair value balance sheets, less the value of net assets attributable to senior
preferred stockholders, the fair value attributable to preferred stockholders and the fair value of noncontrolling interests.
Noncontrolling Interests in Consolidated Subsidiaries
Noncontrolling interests in consolidated subsidiaries primarily represented preferred stock interests that third parties held
in our two majority-owned REIT subsidiaries at December 31, 2009. The fair value of the third-party noncontrolling interests
in these REITs on our consolidated fair value balance sheets at December 31, 2009 was based on Freddie Mac’s preferred
stock quotes. During the second quarter of 2010, the two REITs were eliminated via a merger transaction. As a result, there
was no preferred stock of the REITs held by third party stockholders at December 31, 2010. For more information, see
“NOTE 16: NONCONTROLLING INTERESTS.”
NOTE 21: LEGAL CONTINGENCIES
We are involved as a party to a variety of legal and regulatory proceedings arising from time to time in the ordinary
course of business including, among other things, contractual disputes, personal injury claims, employment-related litigation
and other legal proceedings incidental to our business. We are frequently involved, directly or indirectly, in litigation
involving mortgage foreclosures. From time to time, we are also involved in proceedings arising from our termination of a
seller/servicer’s eligibility to sell mortgages to, and/or service mortgages for, us. In these cases, the former seller/servicer
sometimes seeks damages against us for wrongful termination under a variety of legal theories. In addition, we are
sometimes sued in connection with the origination or servicing of mortgages. These suits typically involve claims alleging
wrongful actions of seller/servicers. Our contracts with our seller/servicers generally provide for indemnification against
liability arising from their wrongful actions with respect to mortgages sold to Freddie Mac.
Litigation and claims resolution are subject to many uncertainties and are not susceptible to accurate prediction. In
accordance with the accounting standards for contingencies, we reserve for litigation claims and assessments asserted or
threatened against us when a loss is probable and the amount of the loss can be reasonably estimated.
Putative Securities Class Action Lawsuits
Ohio Public Employees Retirement System (“OPERS”) vs. Freddie Mac, Syron, et al. This putative securities class
action lawsuit was filed against Freddie Mac and certain former officers on January 18, 2008 in the U.S. District Court for
the Northern District of Ohio purportedly on behalf of a class of purchasers of Freddie Mac stock from August 1, 2006
through November 20, 2007. The plaintiff alleges that the defendants violated federal securities laws by making “false and
misleading statements concerning our business, risk management and the procedures we put into place to protect the
company from problems in the mortgage industry.” On April 10, 2008, the Court appointed OPERS as lead plaintiff and
approved its choice of counsel. On September 2, 2008, defendants filed a motion to dismiss plaintiff’s amended complaint.
On November 7, 2008, the plaintiff filed a second amended complaint, which removed certain allegations against Richard
Syron, Anthony Piszel, and Eugene McQuade, thereby leaving insider-trading allegations against only Patricia Cook. The
second amended complaint also extends the damages period, but not the class period. The plaintiff seeks unspecified
damages and interest, and reasonable costs and expenses, including attorney and expert fees. On November 19, 2008, the
Court granted FHFA’s motion to intervene in its capacity as Conservator. On April 6, 2009, defendants filed a motion to
dismiss the second amended complaint, which motion remains pending.
Kuriakose vs. Freddie Mac, Syron, Piszel and Cook. Another putative class action lawsuit was filed against Freddie Mac
and certain former officers on August 15, 2008 in the U.S. District Court for the Southern District of New York for alleged
violations of federal securities laws purportedly on behalf of a class of purchasers of Freddie Mac stock from November 21,
2007 through August 5, 2008. The plaintiff claims that defendants made false and misleading statements about Freddie
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