BC Trustee Named In SEC Lawsuit Against Former Mortgage Giant Execs
Published: Wednesday, December 21, 2011
Updated: Wednesday, January 9, 2013 19:01
Boston College Trustee and Adjunct Professor Richard Syron, BC '66, was recently named in a lawsuit made by the Securities and Exchange Commission (SEC), accusing Syron, former CEO of the government sponsored mortgage giant Freddie Mac, of misleading investors and ultimately contributing to the 2008 financial crisis. The lawsuits made Friday implicate both Syron and Daniel H. Mudd, former CEO of Freddie Mac's sister company, Fannie Mae.
In March, Syron was served with a Wells notice, an indication that possible enforcement action was forthcoming. Now, after a three year investigation, the SEC has brought a lawsuit against the former CEOs for their alleged deception
The lawsuits accuse Syron, Mudd, and four upper level executives of failing to disclose the risk of subprime mortgages properly. By misleading investors, the executives allegedly contributed to the 2008 financial crisis by feeding the housing bubble before it ultimately burst.
Robert S. Khuzami, the SEC's enforcement chief, made a statement to The New York Times asserting the importance of the lawsuits.
"All individuals, regardless of their rank or position, will be held accountable for perpetuating half-truths or misrepresentations about matters materially important to the interest of our country's investors," Khuzami said. "Investors were robbed of the opportunity to make informed investment decisions."
According to Khuzami, this lawsuit brings the total to 38 legal actions made by the SEC in regard to the 2008 financial crisis
The outcome of the case will likely be determined by the definition of the word "subprime," a term that has not yet been defined by the government. Typically, the term subprime refers to loans made to customers with low credit scores, a practice that increases the risk of the loan.
The executives who have been accused are planning on fighting the lawsuit, claiming that their companies fully and properly disclosed the risk associated with subprime mortgages to investors.
According to The New York Times, Syron's lawyers referred to the case as "fatally flawed" and "without merit."
Mudd, Syron's counterpart, made a statement to The New York Times, agreeing with Syron's lawyer that the lawsuit is groundless.
"The government reviewed and approved the company's disclosures during my tenure, and through the present," Mudd said. "Now it appears that the government has negotiated a deal to hold the government, and government-appointed executives who have signed the same disclosures since my departure, blameless — so that it can sue individuals it fired years ago."
University spokesman Jack Dunn declined to comment on the matter of the lawsuit, but made the following statement.
"Dick Syron is an alumnus of Boston College and a well-respected part-time faculty member and trustee," Dunn said. "We wish him well as he addresses this issue."