Freddie Mac 2012 Annual Report Download - page 320

FHFA to go forward. During the course of the litigation, the U.S. District Court for the Northern District of California
entered a preliminary injunction requiring FHFA to provide a notice and comment period with regard to its directives to
Freddie Mac and Fannie Mae concerning energy liens. Accordingly, on January 26, 2012, FHFA issued an advance notice of
proposed rulemaking seeking comment on whether the restriction on purchasing mortgage loans secured by properties with
outstanding first-lien PACE obligations should be maintained. On August 9, 2012, the U.S. District Court for the Northern
District of California granted summary judgment against FHFA and found that FHFA had failed to comply with required
notice and comment procedures set forth in the APA in directing Freddie Mac and Fannie Mae concerning energy liens. On
October 16, 2012, the U.S. District Court for the Northern District of California entered judgment and directed that FHFA
complete the notice and comment process, and publish a Final Rule, no later than May 14, 2013. FHFA has appealed the
entry of summary judgment against it. While its appeal is pending, FHFA has undertaken the notice and comment process
and stated it will apprise the Court on February 27, 2013 whether it will be able to complete its review by the current
May 14, 2013 deadline.
At present, it is not possible for us to predict the probable outcome of this litigation or any potential effect on our
business, financial condition, liquidity, or results of operations. In addition, we are unable to reasonably estimate the possible
loss or range of possible loss in the event of an adverse judgment in this litigation due to the following factors, among others:
the inherent uncertainty of pre-trial litigation; and the fact that additional appeals may follow.
Related Third Party Litigation and Indemnification Requests
On December 16, 2011, the SEC announced that it had charged three former executives of Freddie Mac with securities
laws violations. These executives are former Chairman of the Board and Chief Executive Officer Richard F. Syron, former
Executive Vice President and Chief Business Officer Patricia L. Cook, and former Executive Vice President for the single-
family guarantee business Donald J. Bisenius.
By letter dated October 17, 2008, Freddie Mac received formal notification of a putative class action securities lawsuit,
Mark vs. Goldman, Sachs & Co., J.P. Morgan Chase & Co., and Citigroup Global Markets Inc., filed on September 23,
2008, in the U.S. District Court for the Southern District of New York, regarding the company’s November 29, 2007 public
offering of $6 billion of 8.375% Fixed to Floating Rate Non-Cumulative Perpetual Preferred Stock.
On January 29, 2009, a plaintiff filed a putative class action lawsuit in the U.S. District Court for the Southern District
of New York styled Kreysar vs. Syron, et al. On April 30, 2009, the Court consolidated the Mark case with the Kreysar case,
and the plaintiffs filed a consolidated class action complaint on July 2, 2009. The consolidated complaint alleged that three
former Freddie Mac officers, certain underwriters and Freddie Mac’s auditor violated federal securities laws by making
material false and misleading statements in connection with the company’s November 29, 2007 public offering of $6 billion
of 8.375% Fixed to Floating Rate Non-Cumulative Perpetual Preferred Stock. The complaint further alleged that certain
defendants and others made additional false statements following the offering. The complaint named as defendants Syron,
former Executive Vice President and Chief Financial Officer Anthony S. Piszel, Cook, Goldman, Sachs & Co., JPMorgan
Securities Inc., Banc of America Securities LLC, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC,
Deutsche Bank Securities Inc., Morgan Stanley & Co. Incorporated, UBS Securities LLC and PricewaterhouseCoopers LLP.
After the Court dismissed, without prejudice, the plaintiffs’ consolidated complaint, amended consolidated complaint,
and second consolidated complaint, the plaintiffs filed a third amended consolidated complaint against
PricewaterhouseCoopers LLP, Syron and Piszel, omitting Cook and the underwriter defendants, on November 14, 2010. On
January 11, 2011, the Court granted the remaining defendants’ motion to dismiss the complaint with respect to
PricewaterhouseCoopers LLP, but denied the motion with respect to Syron and Piszel. On April 4, 2011, Piszel filed a
motion for partial judgment on the pleadings. The Court granted that motion on April 28, 2011. The plaintiffs moved for
class certification, which motion was ultimately denied by the Court. On May 31, 2012, the U.S. Court of Appeals for the
Second Circuit denied plaintiffs’ motion for leave to appeal the denial of class certification. In August 2012, plaintiffs sought
leave to file another motion for class certification, which request the Court denied on September 25, 2012.
Freddie Mac is not named as a defendant in the consolidated lawsuit, but the underwriters previously gave notice to
Freddie Mac of their intention to seek full indemnity and contribution under the underwriting agreement in this case,
including reimbursement of fees and disbursements of their legal counsel. At present, it is not possible for us to predict the
probable outcome of the lawsuit or any potential effect on our business, financial condition, liquidity, or results of operations.
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 litigation and the fact that plaintiffs may appeal the denial
315 Freddie Mac