Freddie Mac 2011 Annual Report Download - page 315

In addition, we are unable to reasonably estimate the possible loss or range of possible loss in the event of an adverse
judgment in the foregoing matter due to the inherent uncertainty of pre-trial litigation and the fact that the Court has not
yet ruled upon motions for class certification or summary judgment. In particular, absent the certification of a class, the
identification of a class period, and the identification of the alleged statement or statements that survive dispositive
motions, we cannot reasonably estimate any possible loss or range of possible loss.
On July 6, 2011, plaintiffs filed a lawsuit in the U.S. District Court for Massachusetts styled Liberty Mutual
Insurance Company, Peerless Insurance Company, Employers Insurance Company of Wausau, Safeco Corporation and
Liberty Life Assurance Company of Boston vs. Goldman, Sachs & Co. The complaint alleges that Goldman, Sachs & Co.
made materially misleading statements and omissions in connection with Freddie Mac’s November 29, 2007 public
offering of $6 billion of 8.375% Fixed to Floating Rate Non-Cumulative Perpetual Preferred Stock. Freddie Mac is not
named as a defendant in this lawsuit.
In an amended complaint dated February 17, 2012, Western and Southern Life Insurance Company and others
asserted claims against GS Mortgage Securities Corp., Goldman Sachs Mortgage Company and Goldman Sachs & Co. in
the Court of Common Pleas, Hamilton County, Ohio. The amended complaint asserts, among other things, that “Goldman
Sachs” is liable to plaintiffs under the Ohio Securities Act for alleged misstatements and omissions in connection with
$6 billion of preferred stock issued by Freddie Mac on December 4, 2007. Freddie Mac is not named as a defendant in
this lawsuit.
Lehman Bankruptcy
On September 15, 2008, Lehman filed a chapter 11 bankruptcy petition in the Bankruptcy Court for the Southern
District of New York. Thereafter, many of Lehman’s U.S. subsidiaries and affiliates also filed bankruptcy petitions
(collectively, the “Lehman Entities”). Freddie Mac had numerous relationships with the Lehman Entities which give rise
to several claims. On September 22, 2009, Freddie Mac filed proofs of claim in the Lehman bankruptcies aggregating
approximately $2.1 billion. On April 14, 2010, Lehman filed its chapter 11 plan of liquidation and disclosure statement,
providing for the liquidation of the bankruptcy estate’s assets over the next three years. The plan and disclosure statement
were subsequently modified several times. Hearings to consider confirmation of the plan were conducted on December 6,
2011 and, on that date, the plan was confirmed by the court. The plan sets aside $1.2 billion to be available for payment
in full of our priority claim relating to losses incurred on short-term lending transactions with certain Lehman Entities if it
is ultimately allowed as a priority claim, but leaves open for subsequent litigation whether our claim of priority status is
proper. In the event that this claim is not ultimately accorded priority status, it will be treated as a senior unsecured claim
under the plan, pursuant to which Freddie Mac would be entitled to receive an estimated distribution of approximately
21% (or approximately $250 million) over the next three years. The plan also provides that general unsecured claims,
such as our claim relating to repurchase obligations of $868 million, will be entitled to a distribution of approximately
19.9% of the allowed amount, if any. The plan does not adjudge or allow our unsecured repurchase obligations claim, but
permits claims allowance proceedings to continue. Finally, the plan entitles Freddie Mac to a distribution of approximately
39% (or about $6.4 million) payable over the next three years on our allowed claim exceeding $16 million relating to
losses on derivative transactions.
Taylor, Bean & Whitaker Bankruptcy
On August 24, 2009, TBW filed for bankruptcy in the Bankruptcy Court for the Middle District of Florida. Prior to
that date, Freddie Mac had terminated TBW’s status as a seller/servicer of loans. On or about June 14, 2010, Freddie Mac
filed a proof of claim in the TBW bankruptcy aggregating $1.78 billion. Of this amount, about $1.15 billion related to
current and projected repurchase obligations and about $440 million related to funds deposited with Colonial Bank, or
with the FDIC as its receiver, which were attributable to mortgage loans owned or guaranteed by us and previously
serviced by TBW. The remaining $190 million represented miscellaneous costs and expenses incurred in connection with
the termination of TBW’s status as a seller/servicer.
With the approval of FHFA, as Conservator, we entered into a settlement with TBW and the creditors’ committee
appointed in the TBW bankruptcy proceeding to represent the interests of the unsecured trade creditors of TBW. The
settlement, which is discussed below, was filed with the bankruptcy court on June 22, 2011. The court approved the
settlement and confirmed TBW’s proposed plan of liquidation on July 21, 2011, which became effective on August 10,
2011.
Under the terms of the settlement, we have been granted an unsecured claim in the TBW bankruptcy estate in the
amount of $1.022 billion, largely representing our claims to past and future loan repurchase exposures. We estimate that
this claim may result in a distribution to us of approximately $40-45 million, which is based on the plan of liquidation
310 Freddie Mac