Ohio Public Employees Retirement System v. Federal Home Loan Mortgage Corp.

P EARSON, J.

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF OHIO

EASTERN DIVISION

OHIO PUBLIC EMPLOYEES )

RETIREMENT SYSTEM, ) CASE NO. 4:08CV0160

)

Plaintiff, )

) JUDGE BENITA Y. PEARSON

v. )

)

FEDERAL HOME LOAN MORTGAGE ) MEMORANDUM OF OPINION

CORPORATION, etc., et al. ) AND ORDER

) [Resolving ECF Nos. 544, 545, 546, 547,

Defendants. ) and 595]

Pending are:

Defendant Richard F. Syron’s Motion for Summary Judgment (ECF No. 544);

Defendant Anthony S. Piszel’s Motion for Summary Judgment on All Claims (ECF No.

545);

Defendant Eugene McQuade’s Motion for Summary Judgment (ECF No. 546); and,

Defendant Federal Home Loan Mortgage Corporation’s (“Freddie Mac”) Motion for

Summary Judgment (ECF No. 547).

The Court has been advised, having reviewed the record, the parties’ briefs, and the applicable

law. The Court has also considered the parties’ Certificates (ECF Nos. 580, 581, and 582) and

the arguments of counsel offered during the oral argument held on May 21, 2025. For the

reasons that follow, the Court grants Defendants’ motions.

I. Background

Plaintiff Ohio Public Employees Retirement System (“OPERS”) is a state pension fund

that provides retirement, disability, survivor and health care benefits, and services for Ohio

public employees. Following a 29% drop in Freddie Mac stock prices in 2007, OPERS filed a

Cook, Piszel, and McQuade). The Court denied OPERS’ renewed motion for class

certification. The Court also granted Freddie Mac’s motion to exclude OPERS’ expert witness,

Dr. Feinstein, and denied OPERS’ motion to exclude Freddie Mac’s experts. Ohio Pub. Emps.

Ret. Sys. v. Fed. Home Loan Mortg. Corp., No. 4:08CV0160, 2018 WL 3861840 (N.D. Ohio

Aug. 14, 2018) (ECF No. 478). OPERS then petitioned for review by the United States Court of

Appeals for the Sixth Circuit under Fed. R. Civ. P. 23(f). Finding that an interlocutory appeal

was not warranted, the Sixth Circuit denied OPERS’ petition for permission to appeal the class

certification decision. In re: Ohio Pub. Emps. Ret. Sys., No. 18-0310 (6th Cir. Jan. 23, 2019)

(order) (ECF No. 482).

Thereafter, OPERS filed a Request for Sua Sponte Summary Judgment arguing that the

class certification decision prevented its case from proceeding, as it precluded it from going

forward individually with its securities claims on the dispositive element of loss causation.

Defendants opposed OPERS’ request.2 The Court subsequently agreed with OPERS and entered

summary judgment for Defendants. See Ohio Pub. Emps. Ret. Sys. v. Fed. Home Loan Mortg.

Corp., No. 4:08CV0160, 2020 WL 5593202 (N.D. Ohio Sept. 17, 2020) (ECF No. 498). On

October 9, 2020, OPERS appealed both the class certification and summary judgment decisions.

See Notice of Appeal (ECF No. 500).

In January 2021, Freddie Mac moved the Sixth Circuit to dismiss the appeal for lack of

jurisdiction. A divided motions panel denied the motion. Ohio Pub. Emps. Ret. Sys. v. Fed.

1 Cook died during the pendency of the case at bar. The claims asserted against

her in the Third Amended Complaint (ECF No. 166) were dismissed with prejudice. See

Stipulation and Order approving the parties’ Stipulation of Dismissal (ECF No. 514).

2 Piszel also indicated he would like the Court to consider a summary judgment

motion to be filed by him on the narrow issue of scienter without awaiting the conclusion

of discovery. See ECF Nos. 489 and 491.

Home Loan Mortg. Corp., No. 20-4082, 2022 WL 97152, at *2 (6th Cir. Jan. 6, 2022) (order).

OPERS raised numerous issues on appeal. After the case had been fully briefed, it was argued

before the merits panel on March 16, 2023. Freddie Mac continued to argue that the Court of

Appeals lacked jurisdiction. The merits panel found that it was not bound by the prior panel’s

determination of jurisdiction. Ohio Pub. Emps. Ret. Sys. v. Fed. Home Loan Mortg. Corp., 64

F.4th 731, 734 (6th Cir. 2023) (ECF No. 501). The Sixth Circuit held this Court’s decision was

not final and thus there was no appellate jurisdiction “[b]ecause the district court’s summary

judgment decision was manufactured by OPERS in an apparent attempt to circumvent the

requirements of Rule 23(f).” Id. at 733. The Court of Appeals reversed and remanded the case

for further proceedings, “at which point the district court may, but is not required to, revisit the

significant issues of law raised by OPERS.” Id. at 736.

In June 2023, the Court held a Telephonic Status Conference. The Court set cutoff dates

for fact and expert discovery and the filing of Daubert and dispositive motions for the merit

stage of the present case. See Order (ECF No. 508).3 The Court will now address the merits of

Defendants’ motions for summary judgment.

II. False Statements

The Court first addresses whether Defendants made materially false or misleading

statements about Freddie Mac’s subprime exposure. For the reasons below, the Court finds that

3 ECF No. 508 provides, in relevant part:

Lead counsel of record shall confer with one another in person in order to

prepare written stipulations as to all uncontested facts to be presented by the

dispositive motion. The stipulations shall be filed with the Court on or

before March 22, 2024. If there are no stipulations, a joint notice stating

same shall be filed by the same date. These are mandatory requirements.

ECF No. 508 at PageID #: 23026, ¶ 6. Lead counsel timely filed a Joint Notice as to Uncontested

Facts (ECF No. 523) stating they “have conferred and have been unable to reach an agreement on

joint stipulations as to uncontested facts to be presented in the dispositive motions.”

OPERS has failed to establish a genuine issue of material fact on this claim and grants summary

judgment in Defendants’ favor.

A. Background and Parties’ Arguments

OPERS alleges that “[t]he primary fraud was Defendants’ failure to disclose Freddie

Mac’s true subprime exposure.” Third Amended Complaint (ECF No. 166) at PageID #: 5571,

¶ 3. OPERS contends that Defendants materially misrepresented Freddie Mac’s subprime

exposure by publicly reporting it as approximately 0.1% of the single-family portfolio while

internally measuring it at approximately 10%. See OPERS’ Omnibus Memorandum in

Opposition (ECF No. 559) at PageID #: 37471. Specifically, OPERS argues that Freddie Mac

internally defined loans rated “Caution (C1 or C2) by LP” as “high-risk Subprimes” and used the

Segmentor model to estimate “the probability that a loan is ‘subprime.’ ” ECF No 559 at PageID

#: 37472-74 (quoting March 31, 2009 Mulligan Presentation (ECF No. 559-91) at FMAC-SEC

025548799). According to OPERS, by mid-2007, Freddie Mac was measuring subprime

exposure at between 8.68% and 10.80% of its portfolio through these internal systems. See ECF

No. 559 at PageID #: 37477-78.

OPERS argues that Defendants’ public statements were “wildly misleading” because they

claimed the Company had “little to no exposure to the subprime risk-layered mortgage products”

and “basically no subprime exposure” while internally recognizing substantial subprime risk

through Caution loans and Segmentor scores. ECF No. 559 at PageID #: 37479-81.

Defendants contend there was no “primary” fraud and that their statements about Freddie

Mac’s subprime exposure were true when made. ECF No. 547-1 at PageID #: 29355; ECF No.

574 at PageID #: 41924. Defendants argue that all witnesses agree they accurately disclosed

Freddie Mac’s subprime exposure, and the documentary record confirming it is

“overwhelming[ly]” in support of the testimony. ECF No. 547-1 at PageID #: 29356.

Defendants emphasize that Freddie Mac’s public disclosure was “thoughtfully worded”

because, as its 2006 Information Statement (ECF No. 559-9 at FMOPERS00205322)4 explained,

“there was no generally accepted definition of the term ‘subprime.’ ” ECF No. 547-1 at

PageID#: 29356-57. They note that Freddie Mac qualified its subprime disclosure by using the

phrase “based on lender-type, underwriting practice, and product structure.” ECF No. 547-1 at

PageID #: 29357 (quoting ECF No. 559-9 at p. 69). Defendants argue that Freddie Mac’s

internal documents and testimony demonstrate that while the Company “purchased substantial

amounts of subprime backed securities for its Retained Portfolio, it had no subprime loans in its

SF Guarantee Portfolio, except for a very small amount of structured securities, called “T-deals,”

which it disclosed.” ECF No. 547-1 at PageID#: 29357.

Regarding the internal use of terms like “subprime” or “subprime-like,” Defendants

contend these do not create a genuine issue of material fact because (1) there is no universal

definition of “subprime”; (2) Freddie Mac’s public statements were qualified as “based on

lender-type, underwriting practice, and product structure”; and (3) even the authors of internal

documents using such terminology testified that Freddie Mac did not purchase subprime loans

for its SF Guarantee Portfolio. See ECF No. 547-1 at PageID #: 29358-59; ECF No. 574 at

PageID #: 41927-28.

Defendants also rely on expert analysis from their finance and economics expert, Dr.

Okongwu, which shows that Freddie Mac’s Caution loans “did not look like and did not perform

like subprime loans” but rather “performed far closer to a set of prime loans.” ECF No. 547-1 at

PageID #: 29359; PageID #: 29315-16.

4 Freddie Mac’s annual reports were titled “Information Statement and Annual

Report to Stockholders,” and its quarterly reports were titled “Information Statement

Supplements”. ECF No. 547-1 at PageID #: 29318 n. 112.

B. Legal Standard

Lead Plaintiff seeks redress for Defendants’ alleged violations of Sections 10(b) and

20(a) of the Securities Exchange Act of 1934, as amended, 15 U.S.C. §§ 78j(b), 78t(a), and SEC

Rule 10b‒5, 17 C.F.R. § 240.10b‒5, promulgated thereunder. To prevail on its claims under

Section 10(b) and Rule 10b‒5, OPERS must prove, among other elements, that Freddie Mac

made a material misrepresentation or omission. See Saxe v. Dlusky, 268 Fed.Appx. 438, 440

(6th Cir. 2008) (affirming summary judgment on Section 10(b) claim when plaintiff “failed to

establish that [the defendant] made any material misrepresentations or omissions”); Escue v.

Sequent, Inc., 869 F. Supp.2d 839, 851 (S.D. Ohio 2012) (granting summary judgment on

Section 10(b) claim when there was neither a misrepresentation, omission or reliance).

C. Discussion

The evidence supports Defendants’ position that Freddie Mac did not purchase loans

from traditional subprime lenders or use subprime underwriting practices and product structures

in its SF Guarantee Portfolio, except for the disclosed T-deals. Multiple internal documents

confirm this, including CPM reports (see, e.g., ECF No.548-84 at PageID #: 31693) that

repeatedly noted “[c]urrently, no subprime loans are within the SF portfolio.” ECF No. 574 at

PageID #: 41925.

OPERS’ argument relies heavily on Freddie Mac’s internal risk management systems,

particularly the Caution loan classifications and Segmentor model. The evidence, however,

shows these internal tools served different purposes than the public disclosures. The Caution

loan designation was an internal risk management tool that classified loans as requiring

additional scrutiny, not necessarily as “subprime” in the traditional sense. Similarly, Freddie

Mac designed the Segmentor model to identify loans that might behave like subprime loans for

risk management purposes, but this does not establish that these loans were subprime based on

“lender-type, underwriting practice, and product structure.”

Likewise, the authors of internal documents using “subprime” or “subprime-like”

terminology testified that they did not believe Freddie Mac purchased subprime loans for its SF

Guarantee Portfolio. See ECF No. 574 at PageID #: 41928. Don Bisenius, whom OPERS

frequently cites, explained that he used such terms “pejoratively” to refer generally to loans of

lower credit quality, not to indicate actual subprime loans. Deposition of Donald J. Bisenius

(ECF No. 548-118) at PageID #: 32085-86.

Defendants’ expert analysis provides evidence that Freddie Mac’s Caution loans did not

perform like subprime loans. Dr. Okongwu’s analysis compared Freddie Mac’s Caution loans to

actual subprime loans and found that they “look like, and perform like” prime loans rather than

subprime loans. ECF No. 574 at PageID #: 41926-27 (citing Dr. Okongwu’s Amended Expert

Report (ECF No. 548-19 at ¶ 13)). This data contradicts OPERS’ characterization of these loans

as subprime.

The Court must also consider that securities law requires evaluation of statements in their

full context, not based on selective quotations or impressions. See In re Copley Pharm., Inc. Sec.

Litig., No. 94-11897-WGY, 1995 WL 169215, at *2 n.5 (D. Mass. Mar. 16, 1995) (“Securities

law is not about fostering senses; it is about actual statements, whether or not they are true or

false. . . .”). When the Court considers Freddie Mac’s statements in their full context, including

the qualifications about the lack of a universal definition of subprime and the specific criteria

used for measurement, the statements accurately reflected the Company’s exposure based on

disclosed methodology.

While OPERS points to various internal communications using subprime-related

terminology, this evidence does not establish that Freddie Mac’s public statements were false.

As the Southern District of New York reasoned in Kuriakose v. Fed. Home Loan Mortg. Corp.,

897 F. Supp.2d 168 (S.D.N.Y. 2012), aff’d sub nom. Central States, Se. & Sw. Areas Pension

Fund v. Fed. Home Loan Mortg. Corp., 543 Fed.Appx. 72 (2d Cir. 2013), “the fact that Freddie

Mac employees attributed different definitions to the term ‘subprime’ in internal correspondence

has no bearing on whether Freddie Mac’s public disclosures were misleading; rather it only

highlights that the term had no set definition.” Id. at 183.

D. Conclusion

After review, the Court finds that OPERS has failed to establish a genuine issue of

material fact regarding whether Defendants made false statements about Freddie Mac’s subprime

exposure. Witness testimony and documentary evidence support the public statements, which

include appropriate qualifications and accurately reflect the surrounding context. The internal

risk management tools OPERS cites served different purposes than public disclosure and do not

establish the falsity of the qualified public statements.

Accordingly, the Court grants Defendants’ motions for summary judgment on this issue.

III. Alt-A Holdings

Next, the Court considers whether Freddie Mac’s public statements about its Alt-A5 loan

exposure were false or misleading. The Court grants summary judgment for Defendants on this

issue, finding that the internal measurement differences do not render Freddie Mac’s disclosures

false because the Company disclosed its methodology and applied it reasonably.

5 “ ‘Alt-A’ refers to loans originated with reduced documentation requirements

and that present increased credit risk.” ECF No. 574 at PageID #: 41945 (emphasis in

original); ECF No. 559 at PageID #: 37481-82 (“ ‘Alt-A’ is a mortgage industry term used

to describe reduced documentation/higher credit risk loans.”)

A. Background and Position of the Parties

OPERS contends that Freddie Mac made actionable misrepresentations by publicly using

the broad Mortgage Credit Risk Analytics (“MCRA”) definition to describe its Alt-A exposure

while reporting exposure according to Investments & Capital Markets’ (undisclosed and much

narrower) definition. See ECF No. 559 at PageID #: 37486. OPERS argues that Freddie Mac’s

internal measurements showed approximately 29% Alt-A exposure as of June 30, 2007, while

publicly disclosing only 8%. See ECF No. 559 at PageID #: 37532. Freddie Mac’s August 30,

2007 Information Statement Supplement stated that it “classified mortgage loans as Alt-A if the

lender that delivers them to us has classified the loans as Alt-A, or if the loans had reduced

documentation requirements which indicate that the loan should be classified as Alt-A.” ECF

No. 559-15 at FMOPERS00209043. The Company estimated “approximately $120 billion, or

eight percent” of its single-family mortgage portfolio as Alt-A mortgage loans. ECF No. 559-15

at FMOPERS00209043. Internal documents, however, show that Freddie Mac’s Single Family

Sourcing group calculated that approximately 29% of loans were labeled as “Low/No Doc” by

the lender through Alt-A Special Characteristic Codes (“SCC”). Sept. 14, 2007 Alt A

Definitions Presentation (ECF No. 559-104) at FMAC-SEC 067770691.

Defendants argue that summary judgment should be granted because (1) there is no

universal definition of “Alt-A” loans, making any alleged misstatements immaterial; (2) OPERS

cannot demonstrate that Freddie Mac’s Alt-A disclosures were false or misleading; and (3)

Defendants relied on robust internal processes to ensure disclosure accuracy. ECF No. 547-1 at

PageID #: 29379-80; ECF No. 574 at PageID #: 41943-44.

B. Legal Standard

In securities fraud cases, statements are materially false or misleading if they would

mislead a reasonable investor about the nature of the investment. Basic Inc. v. Levinson, 485

U.S. 224, 231-32 (1988); In re Sotera Health Co. Sec. Litig., No. 1:23CV0143, 2025 WL

1648942, at *23 (N.D. Ohio March 19, 2025). As a result, courts analyzing falsity interpret

statements “as a reasonable investor would.” See Plymouth Cty. Ret. Ass’n v. ViewRay, Inc., No.

21-3863, 2022 WL 3972478, at *4 (6th Cir. Sept. 1, 2022). A statement may be literally true but

misleading in context if it creates a misleading impression. Berson v. Applied Signal Tech., Inc.,

527 F.3d 982, 985-86 (9th Cir. 2008).

C. Discussion

While the record shows differences between Freddie Mac’s internal measurements and

external disclosures, these differences do not render the disclosures false or misleading. As

Defendants note, there is no universal definition of “Alt-A” loans in the mortgage industry and

OPERS does not dispute this. See ECF No. 574 at PageID #: 41943. The absence of a

standardized definition gives companies discretion in determining how to classify and report

such exposures.

Freddie Mac’s August 30, 2007 Information Statement Supplement provided a clear

definition of how it classified Alt-A loans: “if the lender that delivers them to us has classified

the loans as Alt-A, or if the loans had reduced documentation requirements which indicate that

the loan should be classified as Alt-A.” ECF No. 559-15 at FMOPERS00209043. This

definition, while broad, permitted Freddie Mac to exercise reasonable judgment in its

application.

The evidence shows that Freddie Mac applied this definition by selecting 28 of 93

available Alt-A SCCs for external reporting purposes. See Oct. 5, 2007 Alt-A Definitions

Memorandum (ECF No. 559-105) at PageID #: 41020-21; Sept. 14, 2007 Alt A Definitions

Presentation (ECF No. 559-104) at FMAC-SEC 067770691. While OPERS characterizes this as

an “inconsistency,” the Court disagrees and finds that this represents a reasonable interpretation

of the disclosed definition, particularly the second category requiring that “reduced

documentation requirements . . .indicate that the loan should be classified as Alt-A.” ECF No.

559-15 at FMOPERS00209043. That other internal groups used broader measurements for

different purposes does not invalidate the reasonableness of Defendants’ disclosure

methodology.

OPERS has failed to demonstrate that Freddie Mac’s Alt-A disclosures were false or

misleading. The 29% figure OPERS cites, see ECF No. 559 at PageID #: 37483, reflects one

internal measurement that the Single Family Sourcing group used for risk assessment purposes,

see ECF No. 559-104 at FMAC-SEC 067770691, not necessarily the definitive measure of Alt-A

exposure under Freddie Mac’s disclosed methodology. The existence of multiple internal

definitions and measurements for different business purposes does not establish that the external

disclosure was inaccurate.

Moreover, the internal recognition of “inconsistency” between different measurement

approaches reflects appropriate internal discussion about complex definitions rather than

evidence of false external reporting. Companies routinely use different metrics for different

purposes without rendering any single metric false or misleading.

Defendants have established that Freddie Mac maintained robust internal processes for

ensuring disclosure accuracy. See ECF No. 547-1 at PageID #: 29380. These processes included

professional judgment by qualified personnel in determining appropriate disclosure

methodologies. The Court finds that Defendants’ reliance on these established processes

supports the reasonableness of their Alt-A disclosures.

D. Conclusion

The Court concludes that OPERS has failed to raise a genuine issue of material fact

regarding whether Freddie Mac’s Alt-A disclosures were false and misleading. Freddie Mac

provided a reasonable definition of its Alt-A classification methodology and applied that

definition through established internal processes. OPERS has not shown how the existence of

different internal measurements for different business purposes establishes falsity in Freddie

Mac’s disclosures.

IV. Credit Risk

The Court now turns to whether Freddie Mac’s statements concerning credit risk

generally are actionable, or whether they constitute non-actionable puffery.

A. Legal Standard

Statements constitute non-actionable puffery when they are vague and indefinite

statements of optimism that reasonable investors would not rely upon. In re iRobot Corp. Sec.

Litig., 527 F. Supp.3d 124, 138-39 (D. Mass. 2021). Courts frequently dismiss assertions about a

product’s “value,” “strength,” or “quality” as immaterial puffery. See In re TransDigm Grp.,Inc.

Sec. Litig., 440 F. Supp.3d 740, 763-64 (N.D. Ohio 2020).

In addition, under the “Bespeaks Caution” doctrine, forward-looking statements

accompanied by sufficient cautionary language are protected “regardless of the actual state of

mind” of the defendant. Miller v. Champion Enter. Inc., 346 F.3d 660, 672 (6th Cir. 2003).

B. Discussion

Three credit risk statements are at issue: (1) “Credit has never been better” (McQuade,

March 23, 2007 Bloomberg News Article (ECF No. 43-24 at PageID #: 1351)); (2) “Freddie

Mac is much better positioned for long-term profitability than [it was] a year ago” (Syron, June

14, 2007 Conference Call (ECF No. 559-34) at PageID #: 39021); and, (3) “[Freddie Mac’s]

credit position is relatively strong with limited exposure to the riskiest mortgage products . . . .

Bottom line, at a time when many of our competitors are weakening, Freddie Mac’s position is

growing stronger” (Cook, Sept. 10, 2007 (ECF No. 559-17) at FMAC-SEC 081749809).

OPERS contends the statements were materially false and misleading for several reasons.

First, they argue Freddie Mac’s internal documents contradicted the public statements. Howard

S. Shapiro, an analyst who covered the Company during August 1, 2006 through and including

November 20, 2007 (the “Relevant Period”), explained “[t]he importance of these undisclosed

underwriting deficiencies to a fair evaluation of the Company’s financial condition during the

Relevant Period cannot be overstated.” Shapiro Rebuttal Report (ECF No. 559-6) at p. 15, ¶ 33.

Second, OPERS points to internal reports showing credit quality was “worsening sharply” with

“credit loss forecast for 2007 [at] $450 million and $820 million for 2008, up 7% and 35%

respectively from the prior forecast.” Aug. 21, 2007 Enterprise Risk Management Committee

(“ERMC”) Reports (ECF No. 559-60) at FMAC-SEC 013147413. OPERS contends that the

statements were “anchored in ‘misrepresentation of existing facts’ ” and made specific assertions

about credit position that were objectively false rather than vague optimism. ECF No. 559 at

PageID #: 37515. Third, OPERS argues Defendants “did more than just offer rosy predictions;

[they] stated that the . . . situation was ‘in good shape’ or ‘under control’ while they allegedly

knew that the contrary was true.” ECF No. 559 at PageID #: 37515 (quoting Novak v. Kasaks,

216 F.3d 300, 315 (2d Cir. 2000)). Finally, OPERS maintains Defendants had actual knowledge

the statements were false, noting that “[s]enior management understood throughout the Relevant

Period that credit losses were dramatically increasing” and “expected credit losses were

dramatically increasing.” ECF No. 559 at PageID #: 37517.

Defendants contend OPERS is mismatching external positive statements and contrasting

them with negative internal statements concerning credit risk, “and not mentioning all of the

frank and forthright negative statements made to the market.” Transcript of Oral Argument

(ECF No. 594) at PageID #: 42956-57. They assert Plaintiffs fail to put forth evidence that any

statements were actually false, failing to identify a witness or a document. ECF No. 594 at

PageID #: 43026. Defendants argue the statements OPERS cites are not actionable under five

theories.

1. Admissibility of McQuade’s “Credit Has Never Been Better” Statement

Defendants argue that OPERS’ reliance on McQuade’s alleged statement that “[c]redit

has never been better,” which appeared in a March 2007 Bloomberg News Article, constitutes

inadmissible hearsay that cannot be considered in support of OPERS’ opposition at summary

judgment. ECF No. 574 at PageID #: 41948. Defendants rely on Eisenstadt v. Centel Corp., 113

F.3d 738 (7th Cir. 1997), to support their position that newspaper articles quoting corporate

officers are inadmissible hearsay, qualifying for no exception. Id. at 743.

Eisenstadt, however, is a nearly three-decade-old Seventh Circuit decision that does not

bind the Court. It also did not establish that all newspaper articles are per se inadmissible

hearsay. In Eisenstadt, the Seventh Circuit was concerned not only with the hearsay nature of

the newspaper article but also with the ambiguity of the statement at issue and the defendant’s

dispute as to its accuracy. Id. at 744.

Under Fed. R. Civ. P. 56(c)(2), a party may object that cited materials “cannot be

presented in a form that would be admissible in evidence.” “The Court cannot consider evidence

at summary judgment that a jury could not consider at trial.” Thomas v. Abercrombie & Fitch

Co., 301 F.Supp.3d 749, 755 (E.D. Mich. 2018) (citing Gohl v. Livonia Pub. Schs. Sch. Dist.,

836 F.3d 672, 681 (6th Cir. 2016). In Thomas, the court acknowledged that while summary

judgment materials must be capable of being “replaced by proper evidence at trial,” this does not

create an absolute bar against considering hearsay evidence when the proponent can demonstrate

a path to admissibility. Id. at 755. As the Thomas court noted, “ ‘the party proffering a piece of

evidence must show, or it must be ‘obvious,’ that the evidence ‘can be replaced by proper

evidence at trial.’ ” Id. (quoting Eisenstadt, 113 F.3d at 742). In Almond v. ABB Indus. Sys.,

Inc., No. C2-95-707, 2001 WL 242548 (S.D. Ohio March 6, 2001), the court excluded magazine

articles because “Plaintiffs made absolutely no effort to procure admissible evidence to support

their position” and the articles lacked “equivalent circumstantial guarantees of trustworthiness.”

Id. at *8. Therefore, the question is not whether the evidence is currently in admissible form, but

whether it could be presented in admissible form at trial.

Courts have consistently required parties to “justify their reliance on hearsay or provide

sufficient information (via affidavits or otherwise) to bring the hearsay evidence within one of

the exceptions provided by the Federal Rules of Evidence.” See LaFlamboy v. Landek, 587 F.

Supp. 2d 914, 922 (N.D. Ill. 2008); see also In re Oracle Corp. Sec. Litig., No. C01-00988 SI,

2009 WL 1709050, at *8-9 (N.D. Cal. June 19, 2009) (sustaining defendants’ objections to

statements by Oracle officials contained in newspaper and analyst reports).

The record demonstrates OPERS has failed to show any viable independent corroboration

of the accuracy of the reported McQuade statement. OPERS’ oral argument focused on the

“trustworthiness and reliability” of the Bloomberg article. ECF No. 594 at PageID #: 43013.

This suggests reliance on the residual exception in Fed. R. Evid. 807 which permits the

admission of hearsay when “the statement is supported by sufficient guarantees of

trustworthiness” and “it is more probative on the point for which it is offered than any other

evidence that the proponent can obtain through reasonable efforts.” OPERS has not identified

any witness (who could corroborate the accuracy of the McQuade statement), corporate records

or any other means by which the statement could be presented in admissible form at trial. In

Almond, the court held “magazine articles [do not] have equivalent circumstantial guarantees of

trustworthiness.” 2001 WL 242548, at *8. OPERS’ argument is that if they could get McQuade

to testify at trial, he would probably confirm he made the statement. ECF No. 594 at PageID #:

43013.

This places OPERS in the same position as the plaintiffs in Eisenstadt and Almond, who

“made absolutely no effort to procure admissible evidence to support their position.” Almond,

2001 WL 242548, at *8. Without some demonstration that the Bloomberg article could be

“replaced by proper evidence at trial,” the Court cannot consider McQuade’s statement for

summary judgment purposes.

2. Accurate Historical Statements Defense

Defendants contend McQuade’s “credit has never been better” statement reflected

accurate historical data at the time it was made, noting the statement was immediately followed

by accurate delinquency rate data showing 20 or 30 percent improvement over the prior year.

ECF No. 574 at PageID #: 41949. As Defendants emphasize, “accurate statements of historical

fact are not actionable, as a matter of law, for failing to disclose concerns about future results.”

ECF No. 574 at PageID #: 41949; see also ECF No. 547-1 at PageID #: 29374 (citing In re Ford

Motor Co. Sec. Litig., Class Action, 381 F.3d 563, 570 (6th Cir. 2004) and In re Sofamor Danek

Grp., Inc., 123 F.3d 394, 401 n.3 (6th Cir. 1997) (“a violation of federal securities law cannot be

premised upon a company’s disclosure of accurate historical data”)).

To the extent any of the credit risk statements reflect accurate historical performance data

available at the time they were made, they cannot form the basis for securities fraud liability

here. Companies are not required to qualify accurate reports of past successes by mentioning

possible future challenges. Likewise, OPERS has not challenged the underlying accuracy of the

historical data supporting these statements.

3. Puffery Analysis

Defendants characterize the statements as vague, indefinite expressions of optimism that

cannot support securities fraud claims, arguing that statements about being “better positioned” or

“growing stronger” constitute non-actionable puffery. ECF No. 574 at PageID #: 41952 (citing

In re iRobot, 527 F. Supp.3d at 138-39). Defendants note that Syron’s statement addressed

multiple factors including “high asset quality, low risk exposure and improving operations” that

supported the optimistic assessment. ECF No. 574 at PageID #: 41950.

The credit risk statements fall within the established puffery doctrine. Terms like “better

positioned,” “growing stronger,” and “relatively strong” lack objective standards against which

investors could measure performance. These generalized expressions of corporate optimism,

even if ultimately proven wrong by events, cannot support securities fraud claims as a matter of

law.

4. “Bespeaks Caution” Doctrine

Defendants also invoke the “Bespeaks Caution” doctrine, asserting that the statements

were forward-looking and that Freddie Mac provided meaningful cautionary language in its risk

disclosures. ECF No. 574 at PageID #: 41952. In the Sixth Circuit, “if the statement qualifies as

‘forward-looking’ and is accompanied by sufficient cautionary language, a defendant’s statement

is protected regardless of the actual state of mind.” ECF No. 574 at PageID #: 41953 (quoting

Miller, 346 F.3d at 672).

The forward-looking nature of statements about being “better positioned for long-term

profitability” and having a “growing stronger” position, combined with Freddie Mac’s extensive

cautionary language about credit risks in its public filings, triggers protection under Miller. This

provides an additional, independent basis for dismissing the credit risk claims regardless of any

internal contradictory evidence.

5. Mixed Internal Evidence

The internal Freddie Mac documents OPERS cites contain both positive and negative

assessments. As Defendants demonstrate, OPERS cherry-picked negative portions while

ignoring contradictory evidence showing “[o]verall SF credit portfolio risk is still relatively

low,” ERMC Reports, Oct. 3, 2006 (ECF No. 559-76) at FMAC-SEC 082820947, and describing

the single-family portfolio as “well diversified by key risk attributes,” ERMC Reports, June 12,

2007 (ECF No. 559-77) at FMAC-SEC 082820599.

The mixed nature of internal documents undermines OPERS’ falsity claims. When

internal assessments contain both positive and negative elements, Defendants cannot be faulted

for emphasizing the positive aspects in public communications, particularly when the statements

constitute puffery or forward-looking projections accompanied by cautionary language.

C. Conclusion

The evidence, viewed in the light most favorable to OPERS, does not create genuine

disputes sufficient to survive summary judgment on whether the credit risk statements were false

or misleading. First, the McQuade statement cannot be considered due to inadmissible hearsay

concerns and OPERS’ failure to demonstrate a path to admissibility at trial. Second, the

remaining statements constitute either accurate historical facts, non-actionable puffery or

forward-looking statements protected by the “Bespeaks Caution” doctrine. The mixed nature of

internal documents, containing both positive and negative assessments, undermines any claim

that the public statements were objectively false. Defendants are entitled to summary judgment

on the falsity element of OPERS’ credit risk claims.

V. Underwriting Guidelines

Next, the Court considers whether Freddie Mac’s statements or alleged omissions

concerning its underwriting guidelines are actionable.

A. Legal Standard

Section 10(b) and Rule 10b–5 establish an implied private cause of action. Halliburton

Co. v. Erica P. John Fund, Inc. (Halliburton II), 573 U.S. 258, 267 (2014). “To recover

damages for violations of section 10(b) and Rule 10b-5, a plaintiff must prove (1) a material

misrepresentation or omission by the defendant; (2) scienter; (3) a connection between the

misrepresentation or omission and the purchase or sale of a security; (4) reliance upon the

misrepresentation or omission; (5) economic loss; and (6) loss causation.” Id. (internal quotation

marks and citation omitted); see also Macquarie Infrastructure Corp. v. Moab Partners, L.P.,

601 U.S. 257, 266 (2024) (a “pure omission”—the failure to disclose information in the absence

of an inaccurate, incomplete, or misleading statement—cannot give rise to liability under federal

securities law). Statements that are merely vague and indefinite statements of optimism or

corporate puffery are not actionable. See, e.g., ECA, Loc. 134 IBEW Joint Pension Tr. of Chi. v.

JP Morgan Chase Co., 553 F.3d 187, 205-206 (2d Cir. 2009) (bank’s statements that risk

management processes were “highly disciplined” and “set the standard” for “integrity” were

“precisely the type of ‘puffery’ that this and other circuits have consistently held to be

inactionable”).

“Macquarie is clear: something cannot be a pure omission if it involves ‘affirmative

assertions’ or ‘statements made.’ ” In re FirstEnergy Corp. Sec. Litig., --- F.4th --- Nos. 23-

3940/ 3943/ 3945/ 3946/ 3947, 2025 WL 2331754, at *12 (6th. Cir. Aug. 13, 2025) (citing

Macquarie, 601 U.S. at 264). A duty to disclose arises only when positive law requires

disclosure or when one “omit[s] to state a material fact necessary in order to make the statements

made, in the light of the circumstances under which they were made, not misleading.” 17 C.F.R.

§ 240.10b‒5(b).

B. Challenged Statements

OPERS challenges three primary statements regarding Freddie Mac’s underwriting

practices: (1) references to “prudent underwriting standards” ((ECF No. 559-40) at FMAC-SEC

081749567); (2) claims of maintaining a “disciplined approach in underwriting” (ECF No. 559-

25) at FMOPERS00186213); and, (3) factual statements about having “developed internal credit

policies and appraisal, underwriting and other purchase policies and guidelines” (ECF No. 559-

9) at FMOPERS00205256).

C. Discussion

OPERS alleges four categories of omissions, and each fails to meet the legal standard for

actionable securities fraud.

1. Ineffective Underwriting Standards and Quality Control

OPERS contends Freddie Mac failed to disclose that its “underwriting standards and

quality control systems were ineffective throughout the Relevant Period.” ECF No. 559 at

PageID #: 37438-40. This allegation fails for multiple reasons.

First, OPERS has not identified any specific public statement that was rendered

misleading by this supposed omission. Under Backman v. Polaroid Corp., 910 F.2d 10 (1st.

Cir. 1990), a company is not required to publish every fact about every subject it voluntarily

discloses, but only such facts “that are needed so that what was revealed would not be ‘so

incomplete as to mislead.’ ” Id. at 16 (quoting SEC v. Texas Gulf Sulphur Co., 401 F.2d 833,

862 (2d Cir.1968) (en banc), cert. denied, 394 U.S. 976 (1969).

Second, this represents precisely the type of “soft information” that courts recognize

companies have no duty to disclose absent specific misleading statements about the same subject

matter. In the Sixth Circuit, courts distinguish “hard information”—“typically historical

information or other factual information that is objectively verifiable”—from “soft

information”—“predictions and matters of opinions.” Zaluski v. United Am. Healthcare Corp.,

527 F.3d 564, 572 (6th Cir. 2008) (citation omitted). No duty exists to disclose soft information

unless “it is virtually as certain as hard facts.” Id. (citations omitted).

2. Inability to Underwrite Nontraditional Products

OPERS claims Freddie Mac failed to disclose its inability to effectively underwrite

nontraditional mortgage products during the Relevant Period. ECF No. 559 at PageID #: 37440-

42. Again, OPERS has not identified any specific statement rendered misleading by this

omission. Likewise, the evidence undermines OPERS’ position. Even Shapiro, OPERS’ expert,

acknowledges that Freddie Mac “nodded to this deficiency in its August 30, 2007, Information

Statement Supplement.” ECF No. 559-4 at Page 15. If Freddie Mac disclosed the issue, there

can be no pure omission claim.

The Office of Federal Housing Enterprise Oversight (“OFHEO”) is Freddie Mac’s

regulator. OPERS’ reliance on the November 2006 examination by is weak. While OFHEO

identified concerns about reporting practices, the same letter explicitly states that OFHEO

“agreed” with Freddie Mac “that securities disclosures accurately represent underwriting

standards and actual business practice.” ECF No. 559-133 at FMAC-SEC 021277051. This

finding directly contradicts OPERS’ misleading disclosure theory.

3. “Abandoned” Underwriting Standards

OPERS alleges Freddie Mac essentially abandoned its underwriting standards altogether

by outsourcing to third parties with less stringent standards. ECF No. 559 at PageID #: 37442-

44. This theory fails because Freddie Mac disclosed its deviation from historical underwriting

practices.

Freddie Mac expressly disclosed that it was increasingly relying on alternative automated

underwriting systems “that differ from our normal standards” and this strategy “could increase

our credit risk.” 2005 Annual Report (ECF No. 548-20) at PageID #: 30177-78. Under

Backman, disclosing the existence and general nature of alternative underwriting approaches was

not misleading merely because Freddie Mac did not quantify the extent of reliance or

characterize the approach as “abandonment.”

4. Increased Use of Exceptions

OPERS contends Freddie Mac failed to disclose “that it dramatically increased the use of

‘exceptions’ to work around its underwriting standards.” ECF No. 559 at PageID #: 37444-47.

This claim fails because OPERS has not identified any public statement about underwriting

exceptions that was rendered misleading. See ECF No. 574 at PageID #: 41965.

Backman directly governs this scenario. Just as Polaroid was not required to disclose the

extent of below-cost sales when it disclosed the fact of such sales, Freddie Mac was not required

to quantify its use of exceptions when it disclosed its increasing reliance on alternative

underwriting approaches. See Backman, 910 F.2d at 16.

D. Conclusion

OPERS has failed to establish either actionable misrepresentations or omissions

regarding Freddie Mac's underwriting guidelines. The challenged statements constitute either

corporate puffery or accurate factual representations. The alleged omissions fail because OPERS

has not identified specific misleading statements that required additional disclosure.

VI. Misrepresentation or Omission

The Court now turns to whether OPERS relied on any alleged misrepresentation or

omission.

A. Legal Standard

To prevail on a Section 10(b) claim, a plaintiff must establish “reliance upon the [alleged]

misrepresentation or omission.” Halliburton II, 573 U.S. at 267. “The traditional (and most

direct) way a plaintiff can demonstrate reliance is by showing that he was aware of a company’s

statement and engaged in a relevant transaction . . . based on that specific representation.” Id.

(citing Amgen Inc. v. Conn. Ret. Plans and Tr. Funds, 568 U.S. 455, 461(2013)).

When plaintiffs cannot show direct reliance, they may invoke presumptions of reliance.

The fraud-on-the-market presumption under Basic, applies when securities trade in an efficient

market. Basic, 485 U.S. at 248 n. 27. Alternatively, in circumstances involving a failure to

disclose, the Affiliated Ute presumption may apply. Under Affiliated Ute, “positive proof of

reliance is not a prerequisite to recovery.” Affiliated Ute Citizens of Utah v. United States, 406

U.S. 128, 153 (1972). Rather, “the facts withheld [must] be material in the sense that a

reasonable investor might have considered them important in the making of this decision.” Id. at

153-54. In other words, the predicate for liability is a “causal connection between a defendant’s

misrepresentation and a plaintiff’s injury.” Stoneridge Inv. Partners, LLC v. Sci.-Atlanta, 552

U.S. 148, 159 (2008).

The Affiliated Ute presumption is “narrow” and applicable solely when “reliance is

impossible or impractical to prove” because “no positive statements were made.” In re

Volkswagen “Clean Diesel” Mktg., Sales Pracs., & Prods. Liab. Litig., 2 F.4th 1199, 1206 (9th

Cir. 2021). The presumption does not extend to cases involving “half-truths,” or

“representations that state the truth only so far as it goes, while omitting critical qualifying

information.” Macquarie, 601 U.S. at 263 (quoting Universal Health Servs., Inc. v. United

States ex rel. Escobar, 579 U.S. 176, 188 (2016)).

B. Discussion

OPERS cannot establish reliance under any available legal theory. First, OPERS has

failed to demonstrate direct reliance on any challenged statement. OPERS concedes that “the

OPERS representative responsible for monitoring Freddie Mac during the relevant period . . .

does not recall reviewing the specific misrepresentations asserted.” ECF No. 559 at PageID #:

37551 n. 591 (citing Deposition of Timothy Swingle (ECF No. 559-131 at 42:14-23; 51:16 -

52:7). Moreover, OPERS’ only other employee who invested in Freddie Mac stock “simply

applied an algorithm without references to Freddie Mac’s disclosures.” ECF No. 574 at PageID

#: 41971 (citing Deposition of Erick D. Weis (ECF No. 548-134) at 21:3 - 24:3, 30:25 - 31:19,

37:19 - 38:8, 51:21 - 53:7). There is no genuine dispute of material fact that OPERS did not

directly rely on any challenged statement.

Second, OPERS cannot invoke the Basic presumption of reliance. As OPERS

acknowledges, the Court previously determined at class certification that OPERS failed to

establish that Freddie Mac’s stock traded in an efficient market during the Relevant Period. See

ECF No. 559 at PageID #: 37549 (citing ECF No. 478 at PageID #: 22772). OPERS agrees it

cannot “avail itself of the Basic presumption of reliance” based on the Court’s prior orders. ECF

No. 559 at PageID #: 37549. OPERS presents no evidence warranting reconsideration of the

Court’s holding.6

Third, OPERS’ attempt to invoke the Affiliated Ute presumption fails for multiple

reasons. OPERS never previously asserted this theory and has instead consistently argued for

the Basic presumption and acknowledged to the Sixth Circuit that it would be unable to avoid

summary judgment without the Basic presumption. See Pl’s Pet. For Permission to Appeal

Order Denying. Class Certification, 2018 WL 5024857, at *21 (6th Cir. 2018) (“OPERS must

prove market efficiency at summary judgment and trial to establish reliance.”).

More fundamentally, the Affiliated Ute presumption does not apply to the case at bar. A

review of OPERS’ Third Amended Complaint (ECF No. 166) reveals that its claims are

6 OPERS declares it “will reserve its rights to raise that issue on appeal.” ECF No.

559 at PageID #: 37549 n. 584.

premised on Defendants’ alleged affirmative misrepresentations, not pure omissions. See ECF

No. 166 at ¶¶ 7, 139-89, 212-24, 269. While the Third Amended Complaint references

“omissions,” it makes clear that any omissions claims are directly related to Defendants’

“representations.” ECF No. 166 at ¶ 137. To the extent OPERS asserts omissions claims, they

are based on alleged “half-truths,” or partial disclosures that allegedly omit material qualifying

information. Macquarie, 601 U.S. at 264 (explaining “the difference between a pure omission

and a half-truth is the difference between a child not telling his parents he ate a whole cake and

telling them he had dessert”).

Finally, even if this were a pure omissions case, the Supreme Court’s decision in

Macquarie held that “pure omissions” are not actionable under Rule 10b‒5. Id. at 264, 266.

According to Freddie Mac, “[i]f a ‘pure omission’ is no longer actionable, it is unclear how any

plaintiff could ever be entitled to a presumption of reliance on one.” ECF No. 574 at PageID #:

41974.

OPERS’ response fails to raise a genuine issue of material fact regarding reliance.

OPERS cites internal communications, such as a “Morning Update” (ECF No. 559-141) in

which Syron described Freddie Mac as “strong and well capitalized.” But this document was not

a public communication, is not referenced in the Third Amended Complaint (ECF No. 166), and

constitutes merely a vague expression of optimism that is immaterial as a matter of law.

C. Conclusion

OPERS cannot establish reliance under any theory. It has not demonstrated direct

reliance, cannot invoke the Basic presumption due to the absence of an efficient market, and

cannot belatedly assert the Affiliated Ute presumption, which does not apply to cases involving

affirmative misrepresentations or half-truths. Accordingly, Defendants are entitled to summary

judgment on this issue.

VII. Loss Causation

Next, the Court considers whether OPERS can prove loss causation.

A. Legal Standard

To establish loss causation under federal securities law, a plaintiff must prove “that the

act or omission of the defendant alleged to violate this chapter caused the loss for which the

plaintiff seeks to recover damages.” 15 U.S.C. § 78u-4(b)(4). As the Supreme Court explained

in Dura Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336 (2005), “a person who ‘misrepresents the

financial condition of a corporation in order to sell its stock’ becomes liable to a relying

purchaser ‘for the loss’ the purchaser sustains ‘when the facts . . . become generally known’ and

‘as a result’ share value ‘depreciate[s].’ ” Id. at 344 (alterations in original) (quoting

Restatement Second, of Torts § 548A, comment b (1977))).

The Sixth Circuit clarified that in evaluating loss causation, “a misstatement or omission

is the ‘proximate cause’ of an investment loss if the risk that caused the loss was within the zone

of risk concealed by the misrepresentations and omissions alleged by a disappointed investor.”

Ohio Pub. Emps. Ret. Sys. v. Fed. Home Loan Mortg. Corp., 830 F.3d 376, 384 (6th Cir. 2016)

(quoting Lentell v. Merrill Lynch & Co., 396 F.3d 161, 173 (2d Cir. 2005) (emphasis in original).

The plaintiff bears the burden of proving that the alleged misrepresentations or omissions, rather

than other market forces, caused the claimed losses.

B. Discussion

OPERS alleges that Freddie Mac’s November 20, 2007 disclosure caused its losses by

revealing previously concealed risks, specifically: (a) substantial involvement in the

nontraditional low credit mortgage industry; (b) that at least $200 billion of its $700 billion

mortgage portfolio was at high risk; and, (c) a record $2 billion loss on its mortgage investments

for the third quarter of 2007, with more losses expected. ECF 166 at ¶ 134. OPERS asserts that

this revelation “caught the investing public completely by surprise.” ECF No. 166 at ¶ 6; see

also ECF No. 166 at ¶¶ 191, 271.

The record, however, exposes holes in OPERS’ loss causation theory. Most notably,

OPERS’ expert witness, Shapiro—a financial analyst who followed Freddie Mac at the time—

issued a report on October 24, 2007, nearly a month before the November 20 disclosure,

predicting a $1.6 billion loss “[b]ased on data released today by [Freddie Mac]” due to “its credit

exposure.” Fox Pitt Report (ECF No. 548-142) at PageID #: 32624. This undermines the claim

that the market was caught “completely by surprise” and suggests that the information forming

the basis of the November 20, 2007 disclosure was already available to market participants.

Defendants argue that the risks revealed on November 20, 2007 were “not previously

concealed, but were robustly disclosed.” ECF No. 547-1 at PageID #: 29394 (emphasis in

original). They contend that throughout 2007, Freddie Mac disclosed that it was raising loan loss

reserves because it expected increasing credit losses in future periods, making the November

announcement unsurprising to the market. ECF No. 574 at PageID #: 41974-77.

OPERS responds that the Court’s prior class certification decision “legally precludes” it

from offering evidence of loss causation. ECF No. 559 at PageID #: 37553.7 OPERS’ expert,

Dr. Tabak, acknowledges that he “would be able to provide an opinion that loss causation

existed” but concedes he cannot do so consistent with the Court’s prior determinations. Tabak

Report (ECF No. 548-15) at PageID #: 29574, ¶ 32. Notably, Dr. Tabak did not review Freddie

7 “OPERS recognizes, however, that if the Court continues to apply the rationale

of its prior decisions, this will logically involve granting judgment to Defendants on the

elements of loss causation and damages.” Letter dated April 30, 2024 from W. B.

Markovits, one of the attorneys for OPERS, to Jason Frank, one of the attorneys for Freddie

Mac (ECF No. 548-152).

Mac’s disclosures, including the November 20, 2007 press release. See Deposition of Dr. Tabak

(ECF No. 548-136) at 240:18-21.

“[B]ased on this Court’s price impact decision, which is the law of the case, it’s conceded

[by OPERS] that summary judgment is warranted on loss causation and damages. . . .” ECF No.

594 at PageID #: 42986. Defendants correctly note, however, that a class certification decision

does not preclude a plaintiff from offering competent evidence at summary judgment. See Wal-

Mart Stores, Inc. v. Dukes, 564 U.S. 338, 351 (2011); Sali v. Corona Reg’l Med. Ctr., 909 F.3d

996, 1006 (9th Cir. 2018). After all, Fed. R. Civ. P. 23(c)(1)(C) provides that “[a]n order that

grants or denies class certification may be altered or amended before final judgment.” OPERS’

decision not to offer loss causation evidence—whether for “economic or (perceived) procedural

expediency”—cannot excuse its burden of proof. ECF No. 574 at PageID #: 41975.

OPERS attempts to support its loss causation theory by showing that Freddie Mac’s stock

declined 28.69% on November 20, 2007, while other financial institutions announcing similar

losses during the same period experienced minimal or even positive stock price movements.

ECF No. 559 at PageID #: 37425. For example, when Morgan Stanley announced a $3.7 billion

loss on November 8, 2007, its stock increased 4.86%, and when Bank of America announced a

$247 million loss on November 13, 2007, its stock rose 5.21%. ECF No. 559 at PageID #:

37426.

Defendants, however, point out that OPERS omitted AMBAC Financial from its updated

table (ECF No. 559 at PageID #: 37426) despite AMBAC being included in the original analysis

with a positive return of 28.6% (ECF No. 47-1). AMBAC’s price fell 39% six days earlier. See

ECF No. 574 at PageID #: 41976-77 (citing Dr. Bajaj Report (ECF No. 548-17) at PageID #:

29771 n. 288). According to Freddie Mac, this selective omission undermines the reliability of

OPERS’ analysis. See ECF No. 574 at PageID #: 41977.

The fundamental problem with OPERS’ loss causation claim is that it fails 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. The evidence,

including Shapiro’s October 2007 analysis (ECF No. 548-142 at PageID #: 32624) predicting

similar losses based on Freddie Mac’s prior disclosures, suggests that market participants already

possessed the information necessary to anticipate Freddie Mac’s reported losses.

C. Conclusion

OPERS has failed to establish loss causation as a matter of law. First, OPERS has not

offered any admissible evidence to support its loss causation theory, instead relying on a

perceived procedural bar. Second, the record evidence demonstrates that the risks revealed on

November 20, 2007 were not previously concealed but were available to the market through

Freddie Mac’s prior disclosures, as evidenced by OPERS’ own expert’s prediction weeks before

the announcement. Third, OPERS’ analysis is methodologically flawed and appears to

selectively omit contrary evidence.

Because OPERS cannot prove that “the risk that caused the loss was within the zone of

risk concealed by the misrepresentations and omissions alleged,” summary judgment in favor of

Defendants on the issue of loss causation is appropriate. Ohio Pub. Emps. Ret. Sys., 830 F.3d at

384 (emphasis in original; citation omitted).

VIII. Damages

The Court now turns to whether OPERS should be allowed to present evidence of

damages at trial.

A. Legal Standard

To prevail on a Section 10(b) claim, a plaintiff must prove economic loss, i.e., damages.

Matrixx Initiatives, Inc. v. Siracusano, 563 U.S. 27, 37 (2011) (citing Stoneridge Inv. Partners,

LLC v. Scientific-Atlanta, Inc., 552 U.S. 148, 157 (2008)). Fed. R. Civ. P. 26(a)(1)(A)(iii)

requires that all parties, “without awaiting a discovery request, provide to the other parties . . .a

computation of each category of damages claimed by the disclosing party. . . .” Rule 26(e)(1)

requires parties to timely supplement their Rule 26(a) disclosures and discovery responses. Rule

37(c)(1) enforces these disclosure requirements, providing that “[i]f a party fails to provide

information or identify a witness as required by Rule 26(a) or (e), [then] the party is not allowed

to use that information or witness to supply evidence on a motion, at a hearing, or at a trial,

unless the failure was substantially justified or is harmless. . . .”

B. Discussion

1. Mandatory Disclosure

The undisputed facts establish that OPERS has failed to comply with its mandatory

disclosure obligations regarding damages computations. See, e.g., Joint Certificate (ECF No.

582) at PageID #: 42857 (“OPERS has not provided a computation of its damages.”). In its

initial Rule 26(a)(1) disclosures dated June 22, 2012, OPERS stated that it was “premature to

provide any computation of any category of damages at this time.” Instead, OPERS declared it

would “provide defendants with an expert report containing a computation of the damages

claimed in this action at the appropriate time, consistent with orders issued by the Court.” ECF

No. 548-155 at PageID #: 33089, ¶ 10(C).

On October 10, 2023, OPERS served supplemental Rule 26(a)(1) disclosures, which

state: “[t]he materials supporting [OPERS’] out of pocket losses have previously been provided

to Defendants,” and “[a]ny additional calculation of damages will be provided by a

representative of OPERS or a designated expert witness.” ECF No. 548-14 at PageID #: 29561.

The supplement, however, disclosed nothing concrete and merely deferred to future testimony

from unspecified sources.

When Freddie Mac noticed the Rule 30(b)(6) deposition of OPERS seeking information

regarding damages, OPERS designated its Portfolio Manager Erick Weis to testify on the topic.

ECF No. 548-134 at 15:16-21. Critically, Weis testified that he did not believe “OPERS [had]

made any effort to quantify its damages in this case” and that he did not know “what OPERS’

damages are.” ECF No. 548-134 at 123:16-20. This testimony directly contradicts OPERS’

supplemental disclosures suggesting that a company representative would provide damage

calculations.

OPERS’ expert, Dr. David Tabak, likewise failed to provide any damages computations.

While Dr. Tabak opined that “damages to OPERS can be calculated” and that he had “not

uncovered any information that would prevent the calculation of damages,” ECF No. 548-15 at

¶¶ 3, 30, OPERS never asked him to calculate damages, ECF No. 548-136 at 99:22-100:5;

101:9-15. Dr. Tabak confirmed that he offered no damages computations and testified that in

over 100 cases in which he provided expert testimony, this was the only case where he was not

asked to calculate damages. ECF No. 548-136 at 282:16-284:16. OPERS acknowledges that it

has “not produc[ed] [a] specific damage calculation.” ECF No. 559 at PageID #: 37555.8

2. Undisclosed Evidence

Rule 37(c)’s prohibition on the use of undisclosed evidence is “automatic and

mandatory.” RJ Control Consultants, Inc. v. Multiject, LLC, 100 F.4th 659, 668 (6th Cir. 2024)

(quoting Dickenson v. Cardiac & Thoracic Surgery of E. Tenn., P.C., 388 F.3d 976, 983 (6th Cir.

2004)). Courts routinely grant summary judgment when a party is prohibited from offering

8 In its view, OPERS suffered an out-of-pocket loss in the range of approximately

$18 million (LIFO) to $27 million (FIFO). See Chart titled “Summary of OPERS’ Losses

in Freddie Mac Common Stock” (ECF No. 5-1 at PageID #: 113). Attorney Markovits

repeated this view during oral argument before the Sixth Circuit. See 20-4082 Ohio Public

Employees Ret v FHLMC (March 16, 2023) at 1:57.

damages computations due to failure to produce them in discovery. Bessemer & Lake Erie R.R.

Co. v. Seaway Marine Transp., 596 F.3d 357, 369 (6th Cir. 2010) (affirming summary judgment

when plaintiff’s failure to disclose damages computations left “no evidence of [damages] left to

consider”).

OPERS argues that its failure should be excused as “substantially justified or is harmless”

under Rule 37(c)(1). ECF No. 559 at PageID #: 37554. The Sixth Circuit applies a five-factor

test to evaluate this defense: (1) surprise to the opposing party; (2) ability to cure the surprise; (3)

disruption to trial; (4) importance of the evidence; and, (5) the reason for the failure to produce.

Howe v. City of Akron, 801 F.3d 718, 748 (6th Cir. 2015) (citing Russell v. Absolute Collection

Servs., Inc., 763 F.3d 385, 396-97 (4th Cir. 2014)).

All factors weigh against OPERS. First, Defendants would be surprised by any late

damages’ calculations after the close of discovery. Second, OPERS provides no authority

supporting its position that Defendants were required to cure potential surprise by filing a

sanctions motion during discovery. Third, a late disclosure would disrupt trial proceedings,

particularly given OPERS’ stated intention to pursue an appeal and potentially return to the

district court for trial. Fourth, damages evidence is critically important as an essential element of

OPERS’ securities fraud claims. Matrixx, 563 U.S. at 37-38. Fifth, OPERS offers no adequate

justification for its 16-year failure to provide required computations.

OPERS contends that the Court’s prior rulings on price maintenance and price impact

precluded meaningful damages calculations. See ECF No. 559 at PageID #: 37554; ECF No.

594 at PageID #: 42976 (“This Court has already determined, as a matter of law, that there’s no

price impact, which makes it legally impossible for there to be loss causation and damages.”).

Even if those rulings affected the viability of OPERS’ damages theories, they did not excuse

OPERS’ procedural obligation to provide whatever computations it could formulate. The proper

course would have been to provide calculations consistent with available legal theories or to seek

appropriate relief from the Court regarding the disclosure requirements.

C. Conclusion

OPERS’ failure to provide mandatory damages computations over 16 years of litigation

constitutes a violation of Fed. R. Civ. P. 26(a)(1)(A)(iii) and 26(e)(1). This failure is neither

substantially justified nor harmless under the circumstances. Pursuant to Rule 37(c)(1), OPERS

is precluded from offering any damages evidence at trial. Because OPERS cannot prove

damages ‒ an essential element of its Section 10(b) claim ‒ summary judgment is granted in

favor of Defendants on this basis.

IX. “Control Person” Liability

Next, the Court considers whether OPERS can establish “control person” liability against

Syron, Piszel, and/or McQuade under Section 20(a).

A. Legal Standard

Section 20(a) of the Securities Exchange Act creates a cause of action for “control

person” liability and has two requirements for a finding of control person liability: (1) “the

controlled person must have committed an underlying violation of the securities laws or [the]

rules and regulations promulgated thereunder” and (2) “the controlling person defendant . . .

must have directly or indirectly controlled the person liable for the securities law violation.” 17

C.F.R. § 230.405; In re Huntington Bancshares Inc. Sec. Litig., 674 F. Supp.2d 951, 975 (S.D.

Ohio 2009) (citing PR Diamonds, Inc. v. Chandler, 364 F.3d 671, 696 (6th Cir. 2004), abrogated

on other grounds by Matrixx, supra); City of Monroe Emps. Ret. Sys. v. Bridgestone Corp., 399

F.3d 651, 667 (6th Cir. 2005). Control is defined as “the possession, direct or indirect, of the

power to direct or cause the direction of the management and policies of a person, whether

through the ownership of voting securities, by contract, or otherwise.” 17 C.F.R. § 230.405. A

controlling person is liable “unless the controlling person acted in good faith and did not directly

or indirectly induce the act or acts constituting the violation or cause of action.” 15 U.S.C. §

78t(a). A Section 20(a) claim must be predicated on at least one underlying violation of

securities law by a controlled party, which would be Freddie Mac in the present case. Frank v.

Dana Corp., 646 F.3d 954, 962 (6th Cir. 2011). Absent a sufficiently pleaded underlying

violation, the Section 20(a) claim cannot survive. In re Yum! Brands, Inc. Sec. Litig., 73 F.

Supp.3d 846, 870 (W.D. Ky. 2014).

B. Discussion

OPERS cannot establish control person liability under Section 20(a) against Syron,

Piszel, and/or McQuade for two independent reasons. First, there is an absence of an underlying

securities law violation. Second, Syron, Piszel, and McQuade acted in good faith and did not

induce any alleged securities law violations.

1. No Underlying Securities Law Violation

As established in the preceding sections, OPERS has failed to adequately plead the

essential elements of a securities fraud claim against Freddie Mac. Specifically, the Third

Amended Complaint (ECF No. 166) fails to allege material misrepresentations or omissions and

fails to establish a strong inference of scienter. See Frank, 646 F.3d at 962 (requiring underlying

securities law violation as predicate for Section 20(a) claim). Without a viable underlying

securities violation by the controlled entity, Section 20(a) liability cannot attach to Syron, Piszel,

and/or McQuade.

2. Good Faith Defense

Assuming arguendo that OPERS could establish an underlying securities violation,

Syron, Piszel, and McQuade are entitled to the statutory good faith defense under Section 20(a).

The statute provides that controlling persons are not liable if they “acted in good faith and did

not directly or indirectly induce the act or acts constituting the violation or cause of action.” 15

U.S.C. § 78t(a).

The record demonstrates that Syron, Piszel, and McQuade acted in good faith throughout

the Relevant Period. OPERS has failed to assert facts suggesting that Syron, Piszel, and/or

McQuade knowingly participated in, induced, or encouraged any alleged fraudulent conduct.

OPERS offers no response to Piszel’s argument that the Section 20(a) claim against him fails,

even if someone had committed a primary securities law violation, because he “acted in good

faith and did not directly or indirectly induce the act or acts constituting the violation or cause of

action.” ECF No. 545-1 at PageID #: 28156 (quoting 15 U.S.C. § 78t(a)). Likewise, OPERS has

not put forth any admissible evidence that Syron, Piszel, and/or McQuade (1) had actual

knowledge of any material misrepresentations or omissions, (2) deliberately encouraged or

participated in any allegedly deceptive practices, (3) acted with reckless disregard for the

accuracy of disclosed information or (4) failed to implement appropriate oversight or compliance

measures.

The absence of such evidence negates OPERS’ control person claims. See, e.g., In re

Fed. Nat. Mortg. Ass’n Sec., Deriv., and ERISA Litig., 892 F. Supp.2d 59, 71-74 (D.D.C. 2012)

(granting former Fannie Mae CEO summary judgment in securities fraud case because he

“relie[d] in good faith on the professional judgment of the company’s internal and external

accounting and auditing personnel”).

3. Lack of Culpable Participation

Beyond the good faith defense, OPERS has failed to demonstrate that Syron, Piszel,

and/or McQuade engaged in any conduct that would support control person liability. The Third

Amended Complaint (ECF No. 166) relies on conclusory allegations of control without

establishing Syron, Piszel, and/or McQuade’s direct involvement in any allegedly fraudulent

acts. Such allegations are insufficient to state a claim for relief under current pleading standards.

Syron, Piszel, and McQuade’s positions as senior officers, standing alone, do not

establish the type of culpable participation required for Section 20(a) liability. OPERS must

allege specific facts demonstrating how each Individual Defendant used their control to further

or facilitate the alleged securities violations, which they fail to do.

C. Conclusion

OPERS’ Section 20(a) control person liability claims against Syron, Piszel, and

McQuade fail as a matter of law because OPERS cannot establish an underlying securities law

violation by Freddie Mac. Even if OPERS could establish such a violation, the Individual

Defendants are protected by the statutory good faith defense, as OPERS has failed to put forth

any admissible evidence suggesting the Syron, Piszel, and/or McQuade knowingly participated

in or induced any alleged fraudulent conduct.

The Third Amended Complaint’s (ECF No. 166) reliance on conclusory allegations and

the Individual Defendants’ positions, without more, is insufficient to state a viable claim for

control person liability. Accordingly, the Court grants Syron, Piszel, and McQuade summary

judgment on all Section 20(a) claims.

X. Scienter

A. Legal Standard

To prevail on a claim under Section 10(b) of the Securities Exchange Act of 1934 and

Rule 10b-5, a plaintiff must establish that the defendant acted with scienter, “a mental state

embracing intent to deceive, manipulate, or defraud.” Tellabs, Inc. v. Makor Issues & Rights,

Ltd., 551 U.S. 308, 319 (2007) (citing Ernst & Ernst v. Hochfelder, 425 U.S. 185, 193-94, and n.

12 (1976). A plaintiff may satisfy this element by showing either (1) a “knowing and deliberate

intent to manipulate, deceive, or defraud” or (2) “recklessness.” City of Taylor Gen. Emps. Ret.

Sys. v. Astec Indus., Inc., 29 F.4th 802, 812 (6th Cir. 2022) (quoting Doshi v. Gen. Cable Corp.,

823 F.3d 1032, 1039 (6th Cir. 2016). The Sixth Circuit defines recklessness as “highly

unreasonable conduct which is an extreme departure from the standard of ordinary care,” and it

must rise to the level of “conscious disregard,” typically shown through “multiple, obvious red

flags.” Id. (quoting Doshi, 823 F.3d at 1039).

On summary judgment, the Court must determine whether a reasonable jury could find a

strong inference of scienter. See Brown v. Earthboard Sports USA, Inc., 481 F.3d 901, 916-17

(6th Cir. 2007). A strong inference is “more than merely plausible or reasonable—it must be

cogent and at least as compelling as any opposing inference of nonfraudulent intent.” Tellabs,

551 U.S. at 314. Courts assess scienter holistically, considering all allegations and evidence

collectively, not in isolation. In re Omnicare, Inc. Sec. Litig., 769 F.3d 455, 473 (6th Cir. 2014)

(citing Tellabs, 551 U.S. at 322-23); Frank, 646 F.3d at 961. Under the totality of the

circumstances analysis, scienter is established when the facts alleged collectively give rise to a

strong inference of at least recklessness. La. Sch. Emps.’ Ret. Sys. v. Ernst & Young, LLP, 622

F.3d 471, 485 (6th Cir. 2010) see also In re Telxon Corp. Sec. Litig., 133 F. Supp.2d 1010, 1026

(N.D. Ohio Sept 29, 2000) (“[T]he Sixth Circuit employs a form of ‘totality of the

circumstances’ analysis”).

The Sixth Circuit has identified several factors relevant to the scienter analysis. Helwig

v. Vencor, Inc., 251 F.3d 540 (6th Cir. 2001) (en banc), abrogated on other grounds by Tellabs,

supra. The “Helwig factors,” that are “probative of securities fraud,” are as follows:

(1) insider trading at a suspicious time or in an unusual amount;

(2) divergence between internal reports and external statements on the same

subject;

l(a3t)e rc dloisscelnoessusr ein o tfi minec oonf sainst eanllte ignefdolrym faratiuodnu; lent statement or omission and the

(4) evidence of bribery by a top company official;

(5) existence of an ancillary lawsuit charging fraud by a company and the

company’s quick settlement of that suit;

(6) disregard for the most current factual information before making statements;

(7) disclosure of accounting information in such a way that its negative

implications could only be understood by someone with a high degree of

sophistication;

(8) the personal interest of certain directors in not informing disinterested

directors of an impending sale of stock; and

(9) the self-interested motivation of defendants in the form of saving their

salaries or jobs.

Id. at 552. Courts within this Circuit continue to consider the Helwig factors as helpful in

assessing whether a plaintiff has shown that there is a strong inference of scienter. See In re The

Goodyear Tire & Rubber Co. Sec. Litig., 436 F. Supp.2d 873, 900 (N.D. Ohio 2006); In re

Diebold Sec. Litig., No. 5:05CV2873, 2008 WL 3927467, at *7 (N.D. Ohio Aug. 22, 2008)

(“[T]he absence of [the Helwig] factors indicates the absence of scienter.”).

In contrast, evidence of good faith, robust internal controls, or reasonable reliance on

internal audit systems may negate an inference of scienter. See In re Fannie Mae, 892 F.

Supp.2d at 71-74 (granting former Fannie Mae CEO summary judgment in securities fraud case

because he “relie[d] in good faith on the professional judgment of the company’s internal and

external accounting and auditing personnel” and “there [was] no basis for plaintiffs to contend

that [the CEO] was reckless in relying on this reporting and certification process”). Likewise,

motives common to most corporate officers, such as preserving a high corporate credit rating,

maintaining a high stock price or sustaining the appearance of profitability, are insufficient to

plead scienter. Novak, 216 F.3d at 307; see also Inter-Local Pension Fund GCC/IBT v. General

Elec. Co., 445 Fed. Appx. 368, 370 (2d Cir. 2011) (noting that the allegations were legally

insufficient to establish motive for scienter purposes). Instead, plaintiffs must allege that

defendants stood to gain in a concrete and personal way from the fraud, such as through insider

trading during the class period. Novak, 216 F.3d at 307-308.

To survive summary judgment, OPERS must identify specific facts from which a

reasonable jury could find Defendants acted with fraudulent intent or with recklessness so severe

as to be the functional equivalent of intent.

B. Scienter as to Subprime Loan Disclosures

OPERS’ allegations focus on the divergence between Defendants’ internal assessments of

subprime exposure and their public statements during the Relevant Period. OPERS argues this

divergence supports an inference of scienter under Helwig Factors 2, 3, 6, and 9. See ECF No.

559 at PageID#: 37538-47.9 The Court addresses each in turn.

1. Helwig Factor 2 ‒ Divergence Between Internal Reports and External Statements

on the Same Subject

OPERS points to internal reports indicating that Freddie Mac tracked loans with higher

credit risk characteristics in its single-family guarantee portfolio. ECF No. 559 at PageID#:

37520. According to OPERS, these internal materials reflected estimates that between 8.68%

and 10.8% of the portfolio had features associated with subprime loans. ECF No. 559 at PageID

#: 37422 (citing Table 1: Caution Loans in the Single-Family Portfolio (as of June 30, 2007)

(ECF No. 559 at PageID #: 37476) and Table 2: Share of Loans Purchased with Segmentor

Score <1700 in the Single-Family Portfolio (as of July 31, 2007) (ECF No. 559 at PageID #:

37477)). OPERS contrasts these figures with senior executives’ public claims. On May 17,

9 OPERS concedes that Helwig Factors 1, 4, 5, 7, and 8 are “not applicable to this

case.” ECF No. 559 at PageID #: 37547.

2007, Syron stated at a UBS Global Financial Services Conference that “at the end of 2006,

Freddie [Mac] had basically no subprime exposure in our [single-family] guarantee business,”

ECF No. 559-25 at FMOPERS00186214. In its August 30, 2007 Information Statement

Supplement, Freddie Mac’s “Subprime Loans” disclosure stated: “We estimate that

approximately $2 billion, or 0.1 percent, and $3 billion, or 0.2 percent of loans underlying our

single-family mortgage portfolio, at June 30, 2007 and December 31, 2006, respectively, were

backed by subprime mortgage loans.”, or that subprime loans made up only 0.1 or 0.2 percent of

the portfolio. ECF No. 559-15 at FMOPERS00209012. OPERS argues this disparity between

internal assessments and external disclosures demonstrates scienter. See ECF No. 559 at PageID

#: 37542.

Defendants argue Freddie Mac had no single, universally accepted definition of the term

“subprime” during the Relevant Period. See ECF No. 547-1 at PageID#: 29369. Instead,

Freddie Mac used different ways to measure loan risk, and the public statements focused only on

loans from lenders known for subprime lending. See ECF No. 547-1 at PageID #: 29358.

According to Defendants, the internal reports OPERS references used informal or varied

terminology to describe higher-risk loans, but public disclosures focused only on loans from

originators classified as subprime lenders. Defendants maintain this was a much smaller group

than what internal reports were tracking. See ECF No. 547-1 at PageID #: 29325.

Defendants point to unrebutted testimony relating to whether Syron, Piszel, and/or

McQuade knew any statement was false. See ECF No. 594 at PageID#: 42944. Syron testified

“I believed that the attestation process and the sub-attestations and the sub-attestations to that had

all been provided to me[,] so I had every reason to be confident that the statements were correct

and fulsome.” ECF No. 548-123 at 364:9-17. McQuade repeatedly testified that he did not

believe or otherwise disregard any information reflecting that Freddie Mac was actually

purchasing loans from subprime originators beyond what it disclosed. ECF No. 548-108 at 77:6-

10; 256:4-9; 259:5-10; 307:1-5; 307:18 - 308:1. McQuade believed Freddie Mac’s disclosures,

including those in its annual and quarterly reports, were accurate and not misleading. ECF No.

548-108 at 290:8-291:20; 297:11-16. Piszel testified he “was told from the minute that [he] got

there that we did not buy subprime loans.” ECF No. 548-99 at 29:24-25; see also ECF No. 548-

99 at 29:20 - 30:6; 87:8-20; ECF No. 548-100 at 189:5-9.

OPERS’ evidence does not establish a divergence between internal and external

messaging. Internal tools used to monitor credit risk served a different function than external

reporting. Internally, Freddie Mac tracked risk across a broad spectrum. Publicly, it described

exposure in terms of how many loans came from subprime lenders. These were two different

frames of reference. This distinction aligns with the reasoning in Kuriakose, wherein the

Southern District of New York noted that in the absence of a settled definition of “subprime,”

internal variation in terminology did not support a finding of fraud. Kuriakose, 897 F. Supp.2d

at 183.

The materials OPERS cites may reflect differences of opinion and changing

classifications, but they do not amount to a contradiction supporting a strong inference of

scienter. The record, when viewed as a whole, shows Freddie Mac based its statements on one

reasonable interpretation of subprime exposure, even if others in the Company used different

metrics internally. Therefore, Helwig 2 does not support an inference of scienter.

2. Helwig Factor 3 ‒ Closeness in Time Between an Allegedly Fraudulent Statement

or Omission and a Later Inconsistent Disclosure

OPERS argues Freddie Mac executives made public statements shortly before the

Company disclosed substantial financial losses, supporting a strong inference of scienter.

According to OPERS, several of the challenged statements occurred within weeks of the

November 20, 2007 earnings release disclosing a $2 billion quarterly net loss. ECF No. 559 at

PageID #: 37431; 37543.

OPERS highlights statements between early September and early November 2007,

including a September 10 presentation in which Cook stated that Freddie Mac was “growing

stronger” while competitors were weakening. ECF No. 559-17 at FMAC-SEC 081749809.

OPERS contends this was misleading, given internal concerns at the time about deteriorating

credit conditions. ECF No. 559 at PageID #: 37543. OPERS also points to a November 7, 2007

press release which emphasized the Company’s fraud detection and internal controls. See ECF

No. 559-36. OPERS argues the press release omitted material facts about weaknesses identified

in an internal audit. ECF No. 559 at PageID #: 37543-44.

OPERS notes that the Sixth Circuit has treated a six-week gap between an allegedly

misleading statement and a later corrective disclosure as a sufficient time for the third Helwig

factor. ECF No. 559 at PageID #: 37542-43 (citing Dougherty v. Esperion Therapeutics, Inc.,

905 F.3d 971, 981 (6th Cir. 2018)). OPERS maintains that multiple public statements occurring

within this six-week window downplayed risk, overstated underwriting standards or

misrepresented internal controls, and the subsequent November 20 disclosure revealed the true

scope of Freddie Mac’s exposure. See ECF No. 559 at PageID #: 37543.

Defendants respond that the November 2007 disclosure was not inconsistent with prior

statements. They argue public commentary during this period reflected known risks in the

market and did not conceal any information that later came to light. See ECF No. 547-1 at

PageID #: 29372. They also point to case law holding that proximity alone does not establish

scienter without specific facts showing a defendant knew the statements were false when made.

ECF No. 547-1 at PageID #: 29372. (citing Konkol v. Diebold, Inc., 590 F.3d 390, 401 (6th Cir.

2009), abrogated on other grounds by Matrixx, supra). Likewise, Defendants respond that none

of the specific statements OPERS challenges regarding “subprime” exposure fall within the six-

week window OPERS identifies in its brief. According to Defendants, the only such statements

occurred in March, May, and August of 2007 and are too remote to support an inference of

scienter under Helwig 3. In addition, Defendants argue that OPERS fails to identify any

allegedly false “subprime” statements within the six-week period preceding the disclosure. See

ECF No. 574 at PageID #: 41936.

The Court agrees that a short time between public assurances and later disclosures may,

in some cases, support an inference of scienter. See Helwig, 251 F.3d at 552. Proximity between

statements, however, must still be evaluated in the context of the full record. Here, while several

statements occurred within six weeks of the November 20 corrective disclosure, the content of

those statements and the nature of the loss disclosure do not clearly contradict each other. The

statements OPERS cites do not concern subprime loans. Without more, Helwig 3 is insufficient

to support a strong inference of scienter.

3. Helwig Factor 6 ‒ Disregard for the Most Current Factual Information Before

Making Public Statements

OPERS contends that Defendants possessed information suggesting their public

statements were inaccurate, establishing scienter under Helwig 6. OPERS argues that when

combined with alleged satisfaction of Helwig 2 (Divergence Between Internal Reports and

External Statements), the evidence demonstrates Defendants’ scienter. See ECF No. 559 at

PageID #: 37538-42. The Court disagrees.

OPERS cites In re Citigroup Inc. Sec. Litig., 753 F. Supp.2d 206 (S.D.N.Y. 2010), and In

re Moody’s Corp. Sec. Litig., 599 F. Supp.2d 493 (S.D.N.Y. 2009), arguing that evidence

demonstrating defendants possessed “information suggesting that their public statements were

not accurate” suffices to establish scienter. ECF No. 559 at PageID #: 37540. OPERS maintains

that Defendants’ internal calculations were inconsistent with their public statements. ECF No.

559 at PageID #: 37541-42.

The cases OPERS relies on involved clear evidence of disparities between what the

company knew internally and what it disclosed publicly. In Citigroup, the defendant internally

recognized risk and began adjusting its collateralized debt obligations (“CDOs”) holdings

exposure while simultaneously downplaying and denying the same risks to investors. In re

Citigroup, 753 F. Supp.2d at 238. Similarly, in Moody’s Corp, the defendant had “access to

information suggesting that the Company’s public statements were inaccurate.” In re Moody’s,

599 F. Supp.2d at 515.

OPERS’ evidence is significantly weaker than that in the precedents it cites. OPERS

relies primarily on Defendant Syron’s May 14, 2007 statement that “Freddie had basically no

subprime exposure in our guarantee business.” ECF No. 559-25 at FMOPERS00186214.

OPERS contends this statement contradicts information from February and March 2007

meetings wherein Defendants were allegedly informed that the “[w]orst 10% of [Freddie Mac’s]

Flow Business” constituted “subprime-like loans.” ECF No. 559-101 at FMAC-SEC 7517989

(showing McQuade/Cook being responsible for presenting this information to the Board); ECF

No. 559-50 at FMAC-SEC 047450743.

This fails to establish scienter for several reasons. First, as Defendants note, “the express

purpose of the two meetings in February and March 2007 was to determine whether Freddie

Mac should enter the subprime market.” ECF No. 574 at PageID #: 41939 (emphasis in

original). The meetings neither established Freddie Mac was already purchasing subprime loans

nor provided evidence that Freddie Mac’s existing loans performed like subprime loans.

OPERS provides no evidence suggesting Freddie Mac acted inconsistently regarding

subprime loans or had access to information indicating that its public statements were inaccurate.

Defendants assert Syron, Cook, Piszel, and McQuade “all relied on a detailed disclosure process

designed to produce accurate public disclosures.” ECF No. 574 at PageID #: 41938. They argue

good faith reliance on the professional judgment of internal and external accounting and auditing

personnel negates claims of reckless reliance on disclosure processes. ECF No. 574 at PageID #:

41939; see also In re Fannie Mae, 892 F. Supp.2d at 71-74.

The Court finds the evidence insufficient to establish Helwig 6. OPERS has failed to

present evidence sufficient to demonstrate that Defendants disregarded current information

before making public statements. Unlike the defendants in Citigroup and Moody’s, there is no

evidence Defendants recognized internal risks while publicly denying them or had access to

contradictory information. The record instead reflects that Defendants relied upon established

disclosure processes, and the public statements OPERS cites do not contain inherent

contradictions regarding subprime loan exposure.

Most significantly, OPERS has presented no evidence any Defendant subjectively

believed their public statements were factually inaccurate or consciously disregarded current

information when making such statements. This distinguishes the present case from the

precedents OPERS cites, wherein the defendants demonstrably possessed contradictory internal

information.

Accordingly, the Court finds that Helwig 6 is not satisfied in the case at bar.

4. Helwig Factor 9 ‒ Personal Financial Motivation

OPERS asserts Syron, Piszel, and McQuade “had a strong motivation pursuant to the

ninth Helwig factor to engage in the material misrepresentations and omissions at issue here.”

ECF No. 559 at PageID #: 37544. Namely, personal compensation through bonuses, stock

awards, and dividend equivalents tied to Freddie Mac’s stock performance and portfolio growth.

ECF No. 559 at PageID #: 37545.

In 2006 and 2007, Syron, Piszel, and McQuade received over 80 percent of their

compensation from bonuses and stock-related awards tied directly to the Company’s portfolio

growth and stock price. See ECF No. 559 at PageID #: 37545 (citing Freddie Mac’s 2008 Proxy

Statement (ECF No. 559-38) at PageID #: 39220). OPERS argues this created a financial

incentive to pursue the risky “touch more loans” strategy which replaced the conservative

“Steady Freddie” model despite internal warnings about the Company’s inability to assess

associated risks. ECF No. 559 at PageID #: 37546. This strategy allegedly inflated performance

metrics used to justify compensation, enabling the executives to profit significantly. OPERS

argues these compensation structures created concrete, personal financial benefits that courts

recognize as supporting a strong inference of scienter. See ECF No. 559 at PageID #: 37547.

Defendants raise two main responses. First, they argue OPERS did not include these

compensation claims in the Third Amended Complaint (ECF No. 166) and should not be allowed

to add them now. Second, they contend these are generic allegations applicable to most

corporate executives. See ECF No. 574 at PageID #: 41937. They cite PR Diamonds, which

requires concrete benefits tied to specific false statements to support scienter. PR Diamonds, 364

F.3d at 690. The desire to appear successful does not comprise a motive for fraud. Id.

Defendants argue OPERS has not shown any specific benefit from particular misrepresentations.

Regarding dividends, Defendants note these were routine payments benefiting all shareholders,

including OPERS. There is no evidence the senior officers improperly influenced dividend

decisions for personal gain. ECF No. 574 at PageID #: 41938.

The Court agrees with Defendants for several reasons. First, OPERS may not raise new

theories this late in the case when they were not properly included in the complaint. Bridgeport

Music, Inc. v. WM Music Corp., 508 F.3d 394, 400 (6th Cir. 2007) (holding that a plaintiff may

not expand its claims to assert new theories for the first time in response to summary judgment

or on appeal) (citations omitted). “To permit a plaintiff to do otherwise would subject

defendants to unfair surprise.” Tucker v. Union of Needletraders, Indus. & Textile Empls., 407

F.3d 784 788, (6th Cir. 2005). Second, the compensation structure OPERS describes is standard

across corporate America. Most executives receive bonuses and stock awards based on company

performance. This does not prove intent to defraud. Courts require more than general financial

incentives to prove intent to defraud. See Kalnit v. Eichler, 264 F.3d 131, 140 (2d Cir. 2001);

Chill v. Gen. Elec. Co.,101 F.3d 263, 268 (2d Cir. 1996). The compensation must create specific

benefits tied to the alleged false statements, not just general corporate success. In re Criimi Mae,

Inc. Sec. Litig., 94 F.Supp.2d 652, 660 (D. Md. 2000).

OPERS has failed to show that Syron, Piszel, and/or McQuade received concrete benefits

specifically from the alleged misrepresentations about subprime loans. The fact that senior

officers benefited from company growth and stock price increases is normal and happens at

virtually every public company. The dividend allegations are particularly weak since these

payments benefited all shareholders equally, including OPERS itself. Simply benefiting from

company growth does not prove fraudulent intent. OPERS’ compensation evidence does not

support a finding that Defendants intended to defraud investors regarding subprime lending

practices.

Therefore, this factor does not establish the required intent for securities fraud.

5. Conclusion

The Court concludes that OPERS has failed to establish a strong inference of scienter

regarding Defendants’ subprime loan disclosures under each of the four Helwig factors OPERS

relies on. Under the totality of circumstances analysis, the facts alleged collectively do not give

rise to a strong inference of at least recklessness. In re Telxon Corp., 133 F. Supp. 2d at 1026.

Helwig 2 fails because OPERS has not demonstrated a clear divergence between internal

assessments and external statements, as the different metrics served distinct purposes and

reflected reasonable interpretations of subprime exposure in the absence of a universally

accepted definition. Helwig 3 is insufficient because, while some statements occurred within six

weeks of the November 2007 disclosure, the content of those statements does not clearly

contradict the nature of the loss disclosure, and the specific subprime-related statements fall

outside this timeframe. Helwig 6 is not satisfied because OPERS has presented no evidence

Defendants subjectively believed their public statements were inaccurate or consciously

disregarded current information, distinguishing this case from precedents involving demonstrable

internal contradictions. Finally, Helwig 9 fails because the compensation structures reward

general company performance rather than concrete benefits tied to specific false statements about

subprime exposure.

Accordingly, OPERS’ scienter arguments regarding subprime loan disclosures are

insufficient to survive Defendants’ motions for summary judgment.

C. Scienter as to Alt-A Holdings

OPERS contends Freddie Mac misrepresented its exposure to Alt-A mortgage loans,

claiming the Company publicly reported approximately 8% Alt-A exposure as of June 30, 2007,

while internally knowing the actual figure was around 29%. See ECF No. 559 at PageID #:

37532. OPERS maintains Freddie Mac engaged in securities fraud by publicly using a broad

MCRA definition to describe Alt-A exposure, while reporting based on an undisclosed and much

narrower Investments & Capital Markets’s definition. OPERS argues this created actionable

securities fraud once Defendants began using inconsistent definitions internally versus

externally, with senior executives knowing of the discrepancy but continuing to make false

public statements. See ECF No. 559 at PageID #: 37486.

Freddie Mac raises three responses. First, “Alt-A” lacks any concrete, universally

accepted definition in the mortgage industry, making falsity impossible to establish as a matter of

law. See ECF No. 547-1 at PageID #: 29379. While OPERS argues “Alt-A” is a mortgage

industry term used to describe reduced documentation/higher credit risk loans, there is a

difference between just reduced documentation loans and reduced documentation loans that have

higher credit risk. See ECF No. 594 at PageID #: 42952-53. Second, OPERS fails to identify

any evidence that shows senior executives at Freddie Mac knew the Alt-A calculation was

incorrect or were aware of contradictory internal documents. See ECF No. 574 at PageID #:

41944. In fact, the 29% OPERS points to does not refer to 29% of the single-family portfolio.

Rather, it refers to “Year-to-Date 8/31/07 purchases” under Freddie Mac’s MCRA definition (all

loans in lender-designated “low doc” and “no doc” programs, regardless of credit risk). See ECF

No. 594 at PageID #: 42954 (citing ECF No. 559-104 at FMAC-SEC 067770691). The 8%

figure refers to the percent of credit book outstanding (“cr. Book O/S”), which Freddie Mac used

for its “External Definition.” ECF No. 594 at PageID #: 42955. Third, Defendants relied on

robust internal processes and professional judgment to ensure disclosure accuracy. ECF No.

547-1 at PageID #: 29380. Defendants emphasize Freddie Mac’s external definition focuses on

loans that present higher credit risk, rather than all loans regardless of risk level. ECF No. 574 at

PageID #: 41945. Finally, Defendants note that OPERS does not cite a witness who will testify

on scienter as to Alt-A issues. See ECF No. 594 at PageID #: 42945-46.

OPERS’ claim fails because “Alt-A” has no universal definition. Multiple witnesses

testified that Alt-A is “nebulous,” has “no concrete definition,” and means “many different

things” to different market participants. Deposition of Don Bisenius (ECF No. 548-91) at 73:22

(“I think Alt-A is a very nebulous term”); Deposition of Matthew A. Vincent (ECF No. 548-104)

at 157:22-25 (“There is no concrete definition of Alt-A. It’s a term that’s used for many

different things. So I do not have a definition of Alt-A.”); Deposition of Peter J. Federico (ECF

No. 548-93) at 78:7 (“there is no single clear definition of Alt-A”); Deposition of HanqingZhou

(ECF No. 548-94) 30:4-7 (“it’s a very difficult issue because there’s very little uniformity in the

definition. Different reading (sic) agency has different views or multiple views.”). Courts

cannot impose liability for statements that do not have one objective meaning, and defendants

cannot be held liable for interpreting it differently than plaintiffs prefer. See In re Volkswagen

AG Sec. Litig., 661 F. Supp.3d 494, 517 (E.D. Va. 2023) (“The plaintiff must identify a factual

statement or omission—that is, one that is demonstrable as being true or false”) (emphasis in

original; internal quotation marks and citations omitted). Freddie Mac’s definition focuses only

on reduced-documentation loans carrying higher credit risk, rather than counting all reduced-

documentation loans regardless of their actual risk level. The evidence shows Freddie Mac

chose its definition to provide clearer risk disclosure, not to mislead investors.

OPERS also fails to present evidence that Syron, Piszel, and/or McQuade discussed Alt-

A classification issues or were aware of contradictory documents. Moreover, the Company had

robust disclosure processes in place, and management reasonably relied on these systems. ECF

No. 547-1 at PageID #: 29380. Courts have granted summary judgment in similar cases when

defendants relied in good faith on professional judgment and established processes. See Brokop

Living Trust v. Farmland Partners, Inc., No. 18-cv-02104-DME-NYW, 2022 WL 1619939, at

*7 (D. Colo. April 5, 2022); In re Fannie Mae, 892 F. Supp.2d at 71-74.

Summary judgment is warranted in favor of Defendants on the Alt-A holdings claims.

OPERS has not established securities fraud because Alt-A’s lack of universal definition makes

falsity impossible to prove as a matter of law. Even if OPERS could establish falsity, no

evidence suggests Defendants acted with scienter. Without evidence of intent to deceive or

reckless disregard for truth, and given the inherent ambiguity in Alt-A’s definition, OPERS’

claims fail as a matter of law.

D. Scienter as to Credit Risk

OPERS explains credit risk as “how likely a given loan within the portfolio is going to

default,” and that it is “inversely proportional to the company’s financial health.” “As credit risk

is rising, the company’s financial health is decreasing.” ECF No. 594 at PageID #: 42989.

OPERS contends Freddie Mac’s statements concerning credit risk generally were made with

scienter. As stated in Section IV.B. above, three credit risk statements are at issue: (1) “Credit

has never been better” (McQuade, March 23, 2007 Bloomberg News Article (ECF No. 43-24 at

PageID #: 1351)); (2) “Freddie Mac is much better positioned for long-term profitability than [it

was] a year ago” (Syron, June 14, 2007 Conference Call (ECF No. 559-34) at PageID #: 39021);

and, (3) “[Freddie Mac’s] credit position is relatively strong with limited exposure to the riskiest

mortgage products . . . . Bottom line, at a time when many of our competitors are weakening,

Freddie Mac’s position is growing stronger” (Cook, Sept. 10, 2007 (ECF No. 559-17) at FMAC-

SEC 081749809).

OPERS contends the statements were materially false and misleading for several reasons.

First, they argue Freddie Mac’s internal documents contradicted the public statements, with one

analyst explaining “[t]he importance of these undisclosed underwriting deficiencies to a fair

evaluation of the Company’s financial condition during the Relevant Period cannot be

overstated.” Shapiro Rebuttal Report (ECF No. 559-6) at p. 15, ¶ 33. Second, OPERS points to

internal reports showing credit quality was “worsening sharply” with “credit loss forecast for

2007 [at] $450 million and $820 million for 2008, up 7% and 35% respectively from the prior

forecast.” Aug. 21, 2007 Enterprise Risk Management Committee (“ERMC”) Reports (ECF No.

559-60) at FMAC-SEC 013147413. OPERS contends the statements were “anchored in

‘misrepresentation of existing facts’ ” and made specific assertions about credit position that

were objectively false, rather than vague optimism. ECF No. 559 at PageID #: 37515 (quoting

In re Bank of Am. Corp. Sec., Derivative, and ERISA Litig., 757 F. Supp.2d 260, 310 (S.D.N.Y.

2010) (quoting Novak, 216 F.3d at 315)). Third, OPERS argues Defendants “did more than just

offer rosy predictions; [they] stated that the [] situation was ‘in good shape’ or ‘under control’

while they allegedly knew that the contrary was true.” ECF No. 559 at PageID #: 37515

(quoting Novak, 216 F.3d at 315). Finally, OPERS asserts Defendants had actual knowledge the

statements were false, noting that “[s]enior management understood throughout the Relevant

Period that credit losses were dramatically increasing” and “understood . . . expected credit

losses were dramatically increasing.” ECF No. 559 at PageID #: 37517.

Defendants contend OPERS is mismatching external positive statements and contrasting

them with negative internal statements concerning credit risk, without mentioning all the frank

and forthright negative statements made to the market. ECF No. 594 at PageID #: 42956-57.

They assert OPERS does not put forth evidence that any statements were false, failing to identify

a witness or a document. ECF No. 594 at PageID #: 43026.

Defendants argue the statements OPERS cites are not actionable under three theories.

First, they contend the statements reflected accurate historical data at the time they were made,

noting McQuade’s “[c]redit has never been better” statement was immediately followed by

accurate delinquency rate data in the SF Guarantee Portfolio for 2006 (“Freddie Mac’s

delinquency rate is about 20 percent or 30 percent less than it was a year ago at this time”). ECF

No. 43-24 at PageID #: 1351. The same data is presented in Freddie Mac’s 2006 Annual Report.

See ECF No. 548-21 at pages 73 or 125. As Defendants emphasize, “accurate statements of

historical fact are not actionable, as a matter of law, for failing to disclose concerns about future

results.” Kolominsky v. Root, Inc., 100 F.4th 675, 686 (6th Cir. 2024); see also In re Sofamor,

123 F.3d at 401 n.3 (“a violation of federal securities law cannot be premised upon a company’s

disclosure of accurate historical data”). Second, Defendants characterize the statements as

vague, indefinite expressions of optimism that cannot support securities fraud claims, arguing

that statements about being “better positioned” or “growing stronger” constitute non-actionable

puffery. See, e.g., In re iRobot, 527 F. Supp.3d at 139 (finding statement that “the company was

‘well positioned to continue [its] growth trajectory’ in the market is not actionable” puffery).

Third, Defendants invoke the “Bespeaks Caution” doctrine, asserting that the statements were

forward-looking and accompanied by meaningful cautionary language in risk disclosures. ECF

No. 574 at PageID #: 41952. Defendants note that, in the Sixth Circuit, “if the statement

qualifies as ‘forward-looking’ and is accompanied by sufficient cautionary language, a

defendant’s statement is protected regardless of the actual state of mind.” ECF No. 574 at

PageID #: 41953 (quoting Miller, 346 F.3d at 672).

As stated in Section IV.B.1. above, Defendants also argue that OPERS’ reliance on

McQuade’s statement that “[c]redit has never been better” constitutes inadmissible hearsay that

cannot support summary judgment. ECF No. 574 at PageID #: 41948. For the reasons set forth

in Section IV.B.1, the Court cannot consider McQuade’s quoted statement for summary

judgment purposes.

In addition, Defendants assert that McQuade’s statement in the March 2007 Bloomberg

News Article is still the kind of corporate optimism or puffery that is not actionable as a matter

of law. ECF No. 594 at PageID # 43030. Puffery refers to vague, optimistic statements that,

“both on their own terms and in context, lack[] a standard against which a reasonable investor

could expect them to be pegged.” City of Monroe, 399 F.3d at 671. As stated previously, courts

frequently dismiss assertions about a product’s “value,” “strength,” or “quality” as immaterial

puffery. See TransDigm Grp., 440 F. Supp.3d at 763-64. The internal documents OPERS cites

contain both positive and negative assessments. OPERS cherry-picked negative portions of the

documents while ignoring contradictory evidence showing “[o]verall SF credit portfolio risk is

still relatively low,” ERMC Reports, Oct. 3, 2006 (ECF No. 559-76) at FMAC-SEC 082820947,

and describing the portfolio as “well diversified by key risk attributes,” ERMC Reports, June 12,

2007 (ECF No. 559-77) at FMAC-SEC 082820599. The statements about being “better

positioned” or “growing stronger” constitute vague expressions of optimism that cannot support

securities fraud liability as a matter of law, particularly when, as Defendants note, Syron’s

statement addressed multiple factors including “high asset quality, low risk exposure and

improving operations” that supported the optimistic assessment. ECF No. 574 at PageID #:

41950. The evidence, viewed in the light most favorable to OPERS, does not create genuine

disputes sufficient to survive summary judgment on these credit risk statements.

E. Scienter as to Underwriting Guidelines

OPERS argues that Defendants’ statements and omissions concerning underwriting

guidelines were materially false and misleading. According to OPERS, the language in Freddie

Mac’s disclosures “misled the investing public on the extent to which Freddie Mac had

abandoned its underwriting standards and policies,” preventing financial analysts “from being

able to fairly evaluate the Company’s financial condition during the Relevant Period.” ECF No.

559 at PageID #: 37509 (citing Shapiro Rebuttal Report (ECF No. 559-6)). OPERS points out

that for 80 percent of the loans coming into Freddie Mac’s portfolio, Defendants were not

following the underwriting standards that they publicly advertised. ECF No. 594 at PageID #:

42993. OPERS further emphasizes Defendants alleged “selective editing” of an underwriting

disclosure, noting Defendants omitted a critical sentence about monitoring loan performance

while knowing “senior management knew that Freddie Mac ‘had virtually no ability to

effectively’ monitor the performance of these loans.” ECF No. 559 at PageID #: 37509 (citing

Shapiro Report (ECF No. 559-4) at pages 15-16, ¶ 51). In addition, OPERS contends that

Freddie Mac relied on third-party underwriting standards instead of its own internal systems, and

that these third-party standards were significantly riskier than those used by comparable

institutions, such as Fannie Mae and Wells Fargo. ECF No. 594 at PageID #: 42996. OPERS

cites an August 30, 2007 Memorandum (ECF No. 559-72) from Ray Romano, Senior Vice

President of Credit Policy, in which he states that 35 percent of the loans being purchased could

not have been originated under Freddie Mac’s own systems, a fact the Company did not disclose

to the investing public. ECF No. 594 at PageID #: 42997.

OPERS points to internal evidence showing senior executives at Freddie Mac recognized

throughout the Relevant Period that Freddie Mac did “not yet have a rigorous data validation

process in place to understand the quality of data provided by our customers,” ERMC Reports,

July 27, 2006 (ECF No. 559-57) at FMAC-SEC 082133151; ERMC Reports, Aug. 17, 2006

(ECF No. 559-58) at FMAC-SEC 082133080, and was “taking on increased operational risks

[related to its ‘touch more loans’ strategy] when our core systems cannot handle those products,

increasing errors and limiting capacity,” ECF No. 559-57 at FMAC-SEC 082133125.” OPERS

cites November 2006 warnings from OFHEO that “[c]urrent [underwriting] reporting practices

are inadequate for effective credit risk oversight and portfolio management.” ECF No. 559-133

at FMAC-SEC 021277048. OPERS argues despite public statements praising Freddie Mac’s

underwriting standards, Defendants knew these standards and processes were “inadequate for

effective credit risk oversight and portfolio management” and Freddie Mac “had virtually no

ability to effectively underwrite the nontraditional mortgage products that were making up an

increasing portion of the [Single Family] Portfolio.” ECF No. 559 at PageID #: 37511 (quoting

ECF No. 559-133 at FMAC-SEC 021277048; Shapiro Report (ECF No. 559-4) at page 15, ¶ 51.

OPERS asserts that these are not puffery statements, as they can be directly contrasted with

internal assessments and documents Syron, Cook, Piszel, and McQuade received disproving

those statements. See ECF No. 594 at PageID #: 43003-43004.

OPERS highlights the increase in credit waivers and exceptions, noting “[t]he total

number of credit waivers and exceptions increased from 286 in 2004 to 770 in 2005” and “[a]s of

April 30, 2006, there were 612 exceptions approved for eight of the Top Sellers with a combined

volume of $41.9 billion ‒ 80% of the total loan volume.” ECF No. 559-133 at FMAC-SEC

021277048. OPERS contends Freddie Mac management was “migrating away from utilizing our

credit guide as our primary risk management tool” and using “increased use of credit policy

exceptions that expand on current policy and guide parameters.” June 7, 2007 Presentation (ECF

No. 559-65) at FMOPERS 00115798. In support, OPERS cites In re Upstart Holdings, Inc. Sec.

Litig., No. 2:22-cv-02935, 2023 WL 6379810 (S.D. Ohio Sept. 29, 2023), claiming it “perfectly

crystallizes” the legal issue of whether a company’s public statements about underwriting must

align with internal assessments. ECF No. 559 at PageID #: 37510.

Defendants respond that OPERS has neither shown falsity nor scienter. They argue

Freddie Mac’s internal discussions and external statements about underwriting standards were

consistent, not contradictory. They point to a January 2007 memorandum by Paul Mullings

(ECF No. 559-66) which explains changes to underwriting practices in terms of customer focus,

alternative automated underwriting systems, and the increased acquisition of non-traditional loan

products. ECF No. 574 at PageID #: 41958. Defendants note Freddie Mac disclosed these same

themes in its 2006 Annual Report (ECF No. 548-21). See ECF No. 574 at PageID #: 41958-59.

As such, they assert that the cited document “proves the opposite” of OPERS’ theory. ECF No.

574 at PageID #: 41958. Defendants also argue that Freddie Mac had no duty to disclose the

number of credit exceptions, especially in the absence of any public statement directly

addressing them. See ECF No. 574 at PageID #: 41959-60. As to scienter, Defendants contend

that OPERS offers no evidence that anyone at Freddie Mac believed its disclosures were

misleading or acted with intent to defraud. See ECF No. 574 at PageID #: 41967.

In addition, Defendants maintain OPERS’ reliance on In re Upstart is misplaced. The

quotation OPERS cites in support of their theory does not appear in the Upstart opinion but

rather comes from a plaintiff’s memorandum in an unrelated case which rejected that claim as

non-actionable puffery. See ECF No. 574 at PageID #: 41966 (citing Berg v. Velocity Fin., Inc.,

No. 2:20-cv-06780-RGK-PLA, 2020 WL 9216469, at *10 (C.D. Cal. Nov. 30, 2020)). The Berg

court rejected that argument, dismissing the claim because the “identified statements about

Defendants’ underwriting practice is corporate puffery, they cannot support a [securities] claim.”

Berg v. Velocity Fin., Inc., No. 2:20-cv-06780-RGK-PLA, 2021 WL 268250, at *4 (C.D. Cal.

Jan. 25, 2021).

OPERS fails to raise a genuine dispute of material fact regarding either the falsity of the

underwriting-related statements or the presence of scienter. The internal documents OPERS

cites, including the Mullings memorandum, are consistent with Freddie Mac’s external

disclosures. There is no evidence Defendants concealed information about underwriting

practices, nor any showing Defendants acted with the requisite mental state. In re Upstart does

not aid OPERS because the court there dealt with a failure to disclose its AI underwriting

practices, while Freddie Mac affirmatively disclosed its evolving underwriting strategy,

including its use of nontraditional loan products and alternative underwriting systems. See In re

Upstart, 2023 WL 6379810, at *3. Berg and In re Upstart undermine OPERS’ theory as neither

case establishes a general duty to disclose internal assessments or characterizations of

underwriting adjustments. Rather, In re Upstart focused on whether the defendants made

repeated, detailed statements on core business practices while omitting known risks, an analysis

not applicable here. Id. The record lacks any direct or circumstantial evidence that Defendants

made the challenged statements with an intent to deceive or with reckless disregard for the truth.

Statements are not misleading if allegedly omitted information was disclosed. Ley v. Visteon

Corp., 543 F.3d 801, 808 (6th Cir. 2008), abrogated on other grounds by Matrixx, supra). A

duty to disclose only arises from positive law or if a statement would be misleading absent

disclosure, pure omissions are not actionable. Macquarie, 601 U.S. at 259. OPERS must point

to an affirmatively misleading external statement given internal information, not omissions. A

statement is misleading only if inconsistent with omitted information. Backman, 910 F.2d at 17

(holding that Polaroid’s failure to disclose declining sales did not violate Rule 10b‒5 when its

quarterly report disclosed ongoing losses from the product and there was no affirmative

misstatement or duty to update). Freddie Mac disclosed its evolving underwriting standards and

that it had been expanding its share of mortgages it purchased which were underwritten using

alternative automated systems. Under Backman, it had no duty to disclose what percent of the

time it did so. As such, summary judgment is appropriate on this issue.

F. Scienter as to Risk Management

According to OPERS, Freddie Mac made materially false and misleading statements

concerning its risk management practices, particularly in relation to its underwriting processes

and oversight systems. They contend Defendants publicly advertised their “time-tested risk

management approach” while privately acknowledging substantial deficiencies in internal

models, data systems, and credit risk oversight. See ECF No. 559 at PageID #: 37452-54.

OPERS relies on communications from the Federal Housing Finance Agency (“FHFA”), a

Freddie Mac regulator, during and after the Relevant Period, including a September 2008 draft

letter to then-CEO Richard Syron, (ECF No. 559-136) identifying persistent failures to correct

known risk management issues. See ECF No. 559 at PageID #: 37452. These included warnings

that Freddie Mac’s “models [were] not performing well,” that its internal controls were “unsafe

and unsound,” and that the absence of adequate model oversight had a “pervasive negative

impact” on Freddie Mac’s operations. ECF No. 559-136.

OPERS argues that, despite such warnings, Defendants continued to make public

statements suggesting Freddie Mac’s risk management practices were robust, thereby misleading

investors. According to OPERS, these statements falsely implied Freddie Mac was applying its

underwriting standards uniformly and had a detailed understanding of portfolio credit risks. See

ECF No. 559 at PageID #: 37453. In their view, the disconnect between public assurances and

private knowledge supports a finding of scienter.

Defendants respond that OPERS’ “risk management” theory is simply a repackaging of

their underwriting claims and fails for the same reasons. They note Freddie Mac disclosed at

length its practices for managing interest rate and mortgage credit risk, including underwriting

requirements, quality control standards, portfolio diversification, and credit enhancements. See

ECF No. 547-1 at PageID #: 29385. Freddie Mac’s 2006 Annual Report (ECF No. 548-21), for

example, contains nearly 25 pages detailing risk management measures, with 15 pages devoted

to credit risk. See ECF No. 547-1 at PageID #: 29385-86. Defendants argue that OPERS ignores

these detailed disclosures and fail to identify a single misleading statement from them. See ECF

No. 547-1 at PageID #: 29386.

According to Defendants, there is no evidence Syron, Piszel, and/or McQuade acted with

scienter or intended to deceive investors regarding Freddie Mac’s risk management. ECF No.

547-1 at PageID #: 29386. At most, Defendants assert OPERS alleges a “fraud by hindsight”

theory, a routinely rejected theory in the Sixth Circuit. ECF No. 547-1 at PageID #: 29386

(citing La. Sch. Emps.’, 622 F.3d at 484-85 (rejecting securities fraud claims resting on hindsight

and speculation); In re Goodyear, 436 F. Supp.2d at 903 (“ ‘fraud by hindsight,’ [is] a technique

that has been flatly rejected by [the] Sixth Circuit.”).

The record supports Defendants’ position. OPERS fails to meaningfully distinguish its

risk management theory. Rather, it relies on its underwriting claims without identifying any

specific public statement concerning risk management that was materially false or misleading.

See ECF No. 574 at PageID #: 41967. The internal FHFA assessments do not, standing alone,

establish Freddie Mac’s public statements were false when made. Nor do they show Defendants

acted with scienter. OPERS does not connect the cited deficiencies to specific

misrepresentations or omissions, and the evidence does not demonstrate Defendants were aware

that their statements about risk management were materially misleading.

Accordingly, because OPERS has failed to identify actionable statements concerning risk

management or to present evidence of scienter, summary judgment is granted in Defendants’

favor on this issue.

G. Scienter as to Loan Analysis and Fraud Detection Systems

Freddie Mac argues OPERS fails to identify any specific false or misleading statements

made by the Company in support of its “loan analysis software” allegations. See ECF No. 547-1

at PageID #: 29386. Freddie Mac also contends that no one at the Company believed the fraud

detection statements were false when they issued them, defeating a finding of scienter. See ECF

No. 547-1 at PageID #: 29387. Without an actual challenged statement, there can be no valid

Section 10(b) securities fraud claim. Macquarie, 601 U.S. at 259. Regarding Freddie Mac’s

“fraud detection systems,” OPERS points to only one statement from a November 7, 2007 press

release about Defendant's “long-standing commitment to fighting mortgage fraud.” ECF No.

559-36. Defendants contend this statement was factually accurate based on uncontradicted

testimony that Freddie Mac maintained an industry-leading fraud prevention unit since 1989.

Deposition of Jenny Herzog as 30(b)(6) Designee of Freddie Mac (ECF No. 548-126) at 169:24-

170:5.

OPERS now suggests, for the first time in opposition to summary judgment, that the

statement was misleading due to the non-disclosure of an internal audit reflecting limitations in

fraud detection technology. ECF No. 559 at PageID #: 37544 (citing May 17, 2007 Die Memo

(ECF No. 559-121)). According to Defendants, OPERS cannot raise this new theory for the first

time to avoid summary judgment and OPERS identifies no duty to disclose the internal audit

report. See ECF No. 574 at PageID #: 41968-69.

This argument fails for several reasons. First, a plaintiff may not raise new factual

theories of liability for the first time at summary judgment. Bridgeport Music, Inc., 508 F.3d at

400. Second, OPERS identifies no independent duty to disclose the internal audit. Courts in this

Circuit have consistently held that “[a]n omission is actionable under Rule 10b-5 only when

there is a duty to disclose.” See In re Goodyear, 436 F. Supp.2d at 902. Here, the November 7

statement made no reference to data-mining tools, and OPERS has not shown that the omission

of the audit report rendered the statement misleading in context. Third, the record offers no

evidence any Defendant believed the November 7 press release was false when they made it.

Without any evidence of contemporaneous knowledge of falsity or recklessness, OPERS cannot

establish scienter. La. Sch. Emps.’, 622 F.3d at 484-85. Finally, OPERS does not meaningfully

respond to Defendants’ arguments concerning its “loan analysis software.” See ECF No. 547-1

at PageID #: 29386-89; ECF No. 574 at PageID #: 41968. Although OPERS criticizes Freddie

Mac’s Quantum software as outdated and unable to handle nontraditional mortgage products, it

does not identify any actual public statement by Freddie Mac about the software that was false or

misleading. See ECF No. 547-1 at PageID #: 29386. As stated above, a Section 10(b) claim

cannot proceed based solely on omissions or general critiques of internal operations. Macquarie,

601 U.S. at 259.

Summary judgment is warranted for Defendants on this issue because (1) OPERS has

failed to identify a materially false or misleading statement regarding Freddie Mac’s fraud

detection or loan analysis systems, and (2) there is no evidence any Defendant acted with

scienter.

H. Scienter as to Capital Position

OPERS argues Freddie Mac misled investors regarding its capital position in violation of

Section 10(b) and Rule 10b‒5. Specifically, OPERS maintains Defendants falsely portrayed

Freddie Mac as well-capitalized throughout the Relevant Period, despite internal warnings of

mounting credit risk and potential capital strain. See ECF No. 559 at PageID #: 37422, 37518.

Defendants contend that all public statements concerning Freddie Mac’s capital position

were accurate, adequately disclosed, and inactionable. See ECF No. 547-1 at PageID #: 29389-

91. The record confirms that at no point during the Relevant Period did Freddie Mac fall below

its core capital requirements, and OPERS has not produced evidence to the contrary. ECF No.

547-1 at PageID #: 29389. Freddie Mac points to the fact that OFHEO formally designated the

company as “adequately capitalized for year-end 2006 and all four quarters of 2007.” 2008

OFHEO Report (ECF No. 548-145) at PageID #: 32722.

Freddie Mac also disclosed forward-looking risks likely to impact its capital levels,

including the economic trends and housing prices. See ECF No. 547-1 at PageID #: 29390-91.

The statements regarding capital adequacy that OPERS challenges include generic references to

Freddie Mac’s capital strength and preparedness to weather market stress, statements that are

either expressions of corporate optimism, historical facts, or forward-looking assessments

accompanied by meaningful cautionary language. For the reasons previously discussed, they are

not actionable.

OPERS’ response fails to raise a genuine issue of material fact. First, it cites internal

communications, such as a “Morning Update” describing Freddie Mac as “strong and well

capitalized” (ECF No. 559-141) to suggest these statements were misleading. See ECF No. 559-

142 at PageID #: 41578. But this “Morning Update” was not a public communication, is not

referenced in the Third Amended Complaint (ECF No. 166), and constitutes a vague expression

of optimism, which is immaterial as a matter of law. Second, OPERS invokes a hindsight

critique based on internal risk warnings communicated to senior management in 2006 and 2007

including deteriorating credit quality, increased expected losses, and weakening risk metrics on

Freddie Mac’s Enterprise Risk Dashboard. See ECF No. 559 at PageID #: 37422. OPERS,

however, presents no evidence that these internal forecasts invalidated Freddie Mac’s public

statements about its then-current capital levels, or that Defendants disbelieved the truth of their

disclosures when made

To sustain a securities fraud claim, plaintiffs must demonstrate more than poor future

performance or internal risk forecasting. They must identify a materially false or misleading

statement made with scienter. Teamsters Loc. 237 Welfare Fund v. ServiceMaster Glob.

Holdings, Inc., 83 F.4th 514, 525 (6th Cir. 2023). Moreover, OPERS does not contest

Defendants’ arguments concerning the independent capital position claims in its opposition brief

and appears to have abandoned it. Failure to respond to a well-supported motion for summary

judgment on a particular issue constitutes abandonment of that claim. See Little Caesar Enters.,

Inc. v. Little Caesars ASF Corp., No. 17-cv-12329, 2019 WL 12054755, at *3 (E.D. Mich.

March 27, 2019) (citing Brown v. VHS of Mich., 545 Fed.Appx. 368, 372 (6th Cir. 2013) (“This

Court’s jurisprudence on abandonment of claims is clear: a plaintiff is deemed to have

abandoned a claim when a plaintiff fails to address it in response to a motion for summary

judgment.”)).

Accordingly, summary judgment is granted in Defendants’ favor on the capital position

claims because OPERS fails to identify any actionable misstatement or evidence of scienter, and

fails to meaningfully respond to the arguments raised.

XI. Conclusion

Viewing OPERS’ probative evidence and all reasonable inferences drawn therefrom in

the light most favorable to Plaintiff, the Court concludes that there is no genuine issue of

material fact, and the movants are entitled to a judgment as a matter of law. For the foregoing

reasons and those that have been articulated in the memoranda of the points and authorities on

which Defendants rely,

Defendant Richard F. Syron’s Motion for Summary Judgment (ECF No. 544) is granted.

Defendant Anthony S. Piszel’s Motion for Summary Judgment on All Claims (ECF No.

545) is granted.

Defendant Eugene McQuade’s Motion for Summary Judgment (ECF No. 546) is granted.

Defendant Federal Home Loan Mortgage Corporation’s Motion for Summary Judgment

(ECF No. 547) is granted.

The parties’ Joint Motion to Amend Civil Trial Order (ECF No. 595) is denied as moot. Final

judgment will be entered in favor of Defendants and against OPERS on the Third Amended

Complaint (ECF No. 166).

IT IS SO ORDERED.

August 29, 2025 /s/ Benita Y. Pearson

Date Benita Y. Pearson

United States District Judge