Freddie Mac 2015 Annual Report Download - page 323

Financial Statements Notes to the Consolidated Financial Statements | Note 15
Freddie Mac 2015 Form 10-K 321
NOTE 15: LEGAL CONTINGENCIES
We are involved as a party in 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 loans to, and/or
service loans 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 loans. These suits typically involve claims alleging wrongful actions of
seller/servicers. Our contracts with our seller/servicers generally provide for indemnification of Freddie
Mac against liability arising from seller/servicers' wrongful actions with respect to loans sold to or serviced
for Freddie Mac.
Litigation and claims resolution are subject to many uncertainties and are not susceptible to accurate
prediction. In accordance with the accounting guidance for contingencies, we reserve for litigation claims
and assessments asserted or threatened against us when a loss is probable (as defined in such
guidance) and the amount of the loss can be reasonably estimated.
PUTATIVE SECURITIES CLASS ACTION LAWSUIT: OHIO PUBLIC EMPLOYEES
RETIREMENT SYSTEM 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. FHFA later
intervened as Conservator, and the plaintiff amended its complaint on several occasions. The plaintiff
alleged, among other things, 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. The plaintiff sought unspecified damages
and interest, and reasonable costs and expenses, including attorney and expert fees.
In October 2013, defendants filed motions to dismiss the complaint. In October 2014, the Court granted
defendants’ motions and dismissed the case in its entirety against all defendants, with prejudice. In
November 2014, plaintiff filed a notice of appeal in the U.S. Court of Appeals for the Sixth Circuit.
At present, it is not possible for us to predict the probable outcome of this 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 following factors, among others: the inherent uncertainty of the appellate
process; the inherent uncertainty of pre-trial litigation in the event the case is ultimately remanded to the
District Court in whole or in part; and the fact that the District Court has not yet ruled upon motions for
class certification or summary judgment. In particular, absent resolution of the appellate process, 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.