Freddie Mac investors have filed expanded court claims accusing the
mortgage finance company and three former executives of committing
fraud by misleading them about risky loan practices and manipulating
financial results.

The allegations, contained in a nearly 300-page court complaint
filed late on Tuesday, are based in part on interviews with more than
100 former company employees and others who are described in the
lawsuit as having knowledge of Freddie Mac's operations and finances.

Both Freddie Mac and Fannie Mae, the largest providers of
residential mortgage funds, were seized by the government last
September to save them from massive capital shortfalls and put in a
legal status known as conservatorship.

Shareholders at both companies have suffered big losses, with
Freddie Mac shareholders saying they collectively lost billions when
the McLean, Virginia-based company's financial troubles came to light
last year. Its share price has plunged to less than $1 from nearly $28
a year ago.

The lawsuit, an amended version of an earlier case, was brought in
U.S. District Court in Manhattan against the company, former Chief
Executive Richard Syron, Former Chief Financial Officer Anthony Piszel
and ex-Chief Business Officer Patricia Cook.

A Freddie Mac spokeswoman said the company does not comment on
pending litigation. An attorney for the former executives was not
available for comment.

One of the unnamed employees cited in the lawsuit is a former
director of operational risk management at the company, who was quoted
in the complaint as saying that Freddie Mac was an appallingly run
company and that it was clear as far back as August 2007 that its
capital position was inadequate.

CONFIDENTIAL WITNESSES

Other so-called confidential witnesses cited in the complaint
include a former Freddie Mac vice president of investor relations and
an ex-senior examiner with the Office of Federal Housing Enterprise
Oversight, the company's regulator, now part of the newly formed
Federal Housing Finance Agency.

The complaint was filed by the lead plaintiff in the case, Central
States Southeast and Southwest Areas Pension Fund, along with another
pension fund that also had bought Freddie Mac stock, the National
Elevator Industry Pension Plan. The lawsuit seeks class-action, or
group status.

The defendants are accused of inflating the value of Freddie Mac
stock through misleading statements, failing to disclose problems with
the company's capital adequacy and manipulating financial results and
accounting practices to distort the truth about the company's health.

Freddie Mac was essentially a wolf in sheep's clothing, David George, an attorney for the shareholders, told Reuters.

The company misrepresented both that it was a safe haven and that
its exposure to the subprime real estate market was minimal, said
George, of law firm Coughlin Stoia Geller Rudman & Robbins LLP.

The government's control of Freddie Mac poses questions about how
shareholder litigation against the company will be resolved. U.S.
taxpayers could potentially be responsible for paying damages if the
plaintiffs win their case.

George said that while it was unique to be suing a company under
government control, from our perspective, it does not and should not
negatively impact our ability to recover monies on behalf of the
shareholders.