PHILADELPHIA, June 20, 2003 (PRIMEZONE) -- The law firm of Spector, Roseman & Kodroff, P.C. announces that it filed a securities class action lawsuit in the United States District Court for the Eastern District of Virginia, on behalf of purchasers of the common stock of Federal Home Loan Mortgage Corporation ("Freddie Mac" or the "Company") (NYSE:FRE) between April 18, 2000 through June 6, 2003, inclusive (the "Class Period").
The complaint alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of material misrepresentations to the market during the Class Period thereby artificially inflating the price of Freddie Mac securities. The complaint specifically alleges that throughout the Class Period the Company issued statements, press releases, and filed quarterly and annual reports with the SEC describing the Company's business operations and financial condition. These representations were materially false and misleading because they failed to disclose that the Company had materially misstated its operating earnings throughout the Class Period.
Specifically, Freddie Mac may have earned more than it reported and had a higher capital surplus. This practice, called "smoothing" allows companies to meet or exceed earnings estimates and report substantial growth going forward by deferring present gains to future periods. The effect of this practice is to create the impression that earnings growth is steady and the Company meets or exceeds analysts' expectations on a regular basis. This practice violates Generally Accepted Accounting Principles. The Company also is alleged to have failed to account properly for hedges and assets with respect to derivative securities.
On June 9, 2003, before the market opened, Freddie Mac issued a press release announcing that it had fired defendant David Glenn because of "serious questions about the timeliness and completeness of his cooperation and candor with the board's audit committee counsel," that defendant Leland C. Brendsel had retired and that defendant Vaughn Clarke had resigned. On this news, shares of Freddie Mac, which had closed at $59.87 on June 6, 2003, fell to $52 in midday trading on June 9, 2003. On June 11, 2003, the U.S. Attorney's office for Eastern Virginia confirmed that it was investigating Freddie Mac and that the SEC was also investigating whether Freddie Mac deferred income to smooth out results in future periods. Moreover, the SEC is reportedly investigating whether Freddie Mac's CEO and CFO certified otherwise false financial statements in violation of Sarbanes-Oxley.
If you purchased Freddie Mac securities during the Class Period, you may, no later than July 29, 2003, move to be appointed as a Lead Plaintiff in this class action. A Lead Plaintiff is a representative, chosen by the Court, that acts on behalf of other class members in directing the litigation. The Private Securities Litigation Reform Act of 1995 directs Courts to assume that the class member(s) with the "largest financial interest" in the outcome of the case will best serve the class in this capacity. Courts have discretion in determining which class member(s) have the "largest financial interest," and have appointed Lead Plaintiffs with substantial losses in both absolute terms and as a percentage of their net worth.
If you have sustained substantial losses in Freddie Mac securities during the Class Period, please contact Spector, Roseman & Kodroff, P.C. at classaction@srk-law.com for a more thorough explanation of the Lead Plaintiff selection process. If you have relatively small losses, your ability to participate in any recovery will be protected by the Lead Plaintiff(s), and you need take no affirmative steps at this time.
If you wish to join this action, please visit http://www.srk-law.com/dbjoinaclassaction.asp. If you wish to discuss this action or have any questions concerning this notice or your rights or interests, please contact plaintiff's counsel Robert M. Roseman toll-free at 888-844-5862 or via e-mail at classaction@srk-law.com. For more detailed information about the firm please visit its website at http://www.srk-law.com.
Spector, Roseman & Kodroff, P.C., located in Philadelphia, Pennsylvania and San Diego, California, concentrates its practice in complex litigation including actions dealing with securities laws, antitrust, contract and commercial claims. The firm is active in major litigation pending in federal and state courts throughout the United States. The firm's reputation for excellence has been recognized on repeated occasions by courts which have appointed the firm as lead counsel in numerous major class actions involving violations of the federal securities laws and the federal antitrust laws, and consumer fraud. As a result of the efforts of the firm, and its members, hundreds of millions of dollars have been recovered on behalf of thousands of defrauded shareholders and companies.
More information on this and other class actions can be found on the Class Action Newsline at www.primezone.com/ca