U.S. District Judge Benita Y. Pearson last Friday granted Freddie and its former officers summary judgment in a case brought by the Ohio Public Employees Retirement System (OPERS). The pension fund sued the parties in 2008, accusing them of misleading investors about Freddie Mac's actual exposure to the types of subprime loans that sank the mortgage market.

The sides last month sought to postpone an October trial date in anticipation of Pearson's decision, according to case filings. The judge disagreed that Freddie Mac leaders had deceived the public ahead of a disclosed $2 billion loss for the third quarter of 2007 that sent the company's stock plummeting that November.

OPERS failed to "demonstrate that the November 20, 2007 corrective disclosure revealed risks that were previously concealed rather than risks that were already known to the market," wrote Pearson. 

Among other reasons OPERS' arguments fell flat, Pearson cited a financial analyst's report one month earlier predicting a $1.6 billion loss at Freddie Mac because of its credit exposure. 

Last week's order is the latest turn in the case that has seen numerous rulings and appeals. It's unclear if OPERS will appeal the latest development, and an attorney for OPERS deferred comment to the Ohio Attorney General, which didn't respond to requests for comment. 

An attorney for Anthony Piszel, Freddie Mac's former chief financial officer, said Tuesday his client always maintained the lawsuit lacked merit, factually and legally. 

"He is delighted that the court reviewed the evidence closely and determined that no reasonable juror could find for the plaintiff on any element of its claims," a spokesperson wrote in an email.

The accusations against Freddie Mac and its former executives

The pension fund named ex-Freddie Mac CEO Richard Syron, former chief business officer Patricia Cook, ex-president and chief business officer Eugene McQuade and Piszel as defendants in the securities fraud case. 

The lawsuit accused the government-sponsored enterprise of then representing its subprime exposure at just 0.1% of its single-family portfolio, rather than an internal measurement of around 10%. Further, OPERS accused Freddie Mac of having a significantly larger exposure to "Alt-A" loans with reduced documentation requirements. 

Judge Pearson agreed with defendants that despite the difference in internal measurements and external disclosures, there was no universal definition for the "Alt-A" mortgages in question. 

OPERS also pointed to a statement by McQuade in March 2007 that "credit has never been better". That statement reflected accurate historical data at the time, Pearson found, and Freddie Mac couldn't be penalized for failing to disclose concerns about future results. 

The lengthy memorandum also weighed in Freddie Mac's favor on other factors, such as a dispute over the company's disclosures about its underwriting for "nontraditional mortgage products." OPERS also failed to generate a computation for damages in the 16 years of litigation, violating a court rule according to Pearson. 

The pension fund encountered several setbacks in the past two decades, including losing a bid for class certification in 2018 and losing a summary judgment ruling in 2020. OPERS appealed that order, and an appeals court in 2023 remanded the case to the Ohio federal court for further proceedings. 

Syron, Cook and former vice president of credit policy Donald Bisenius settled a Securities and Exchange Commission lawsuit in 2015, which accused them of understating the company's exposure to subprime loans. Cook, who later served as Finance of America's CEO, died in 2023.

The GSEs, which the Trump administration is mulling taking public, have been entangled in other litigation related to the financial crisis. A federal jury in 2023 awarded $612 million in damages to shareholders of Freddie Mac and rival Fannie Mae in a case related to the government's takeover and stock repurchase agreement last decade.