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Freddie Mac to Settle Lawsuits for $410 Million

April 21, 2006|From Reuters

WASHINGTON — Freddie Mac on Thursday said it agreed to pay $410 million to settle class-action and shareholder lawsuits filed after its accounting problems.

The agreement, which is still subject to some conditions, would settle the class-action case filed against the company and some former executives by the Ohio Public Employees Retirement System and others as well as shareholder derivative lawsuits.

It would reduce first-quarter 2005 earnings by about $220 million after tax, Freddie Mac said.

Accounting problems at Freddie Mac, a shareholder-owned but government-sponsored mortgage finance company, led to a $5-billion profit restatement in 2003.

The settlement would be the latest step the company has taken to emerge from that scandal-marked period. The company has built a new management team and says it is getting nearer to a return to regular financial reporting.

This week, Freddie agreed to pay a $3.8-million fine to the Federal Election Commission to settle charges it violated campaign finance law by hosting fundraisers for members of Congress.

"Today's settlement, like the settlement announced earlier this week with the Federal Election Commission, enables this management team to resolve past issues so that we can focus squarely on meeting our important housing mission, running the business well and serving the needs of our customers," said Richard Syron, Freddie's chairman and chief executive.

The class-action cases and shareholder derivative lawsuits have been consolidated and are pending in the U.S. District Court for the Southern District of New York.

The proposed settlement is subject to conditions, including approval by the Retirement Boards of Ohio Public Employees Retirement System, which Freddie said has occurred, and by the State Teachers Retirement System of Ohio.

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