Federal Agricultural Mortgage Corporation may have misrepresented to investors its true financial condition including failing to write down impaired assets on its balance sheet and failing to disclose its ownership of Lehman debt.
This is a securities class action lawsuit against the Federal Agricultural Mortgage Corporation (Farmer Mac).
Farmer Mac is a stockholder-owned federally chartered instrumentality of the United States (a "GSC"), chartered by Congress for the purpose of establishing a market for agricultural real estate and rural housing mortgage loans and rural utilities loans , as well as to facilitate capital market funding for USDA-guaranteed farm program and rural development loans.
Farmer Mac represented that it was reporting "strong" or "record" financial and operational results, and that Farmer Mac had already taken adequate measures to ensure that Farmer Mac would not face catastrophic losses related to un-hedged or risky investments --including a recent three year accounting restatement that was supposed to bring Farmer Mac into compliance with recent improvements in accounting for hedging and investment transactions and losses.
However, unknown to investors, at the time of Farmer Mac's representations, defendants were in possession of material undisclosed information that contradicted their public statements, including that:
(a) defendants were inflating Farmer Mac's results through manipulations relating to the characterization of impairment costs and/or depreciation expenses which inflated Farmer Mac's reported cash flows, gross margins and Core and GAAP-earnings;
(b) Farmer Mac's financial results were inflated by defendants' use of overly optimistic assumptions of asset valuations and investments, which were also reflected in defendants' misuse of mark-to-market accounting;
(c) Farmer Mac's exposure to investment losses and credit problems of trading partners such as Lehman Bros. and Fannie Mae was much greater than represented; and
(d) Farmer Mac was not on track to meet or exceed guidance sponsored or endorsed by defendants.
Investors only first learned the truth about Farmer Mac on September 12, 2008, when its shares closed at $16.56, from an open of $23.78, losing over 30% of their value in one day after Farmer Mac filed documents with the SEC saying it would incur significant charges due to its exposure to Fannie Mae securities. Further, shares of Farmer Mac continued to trade down thereafter to close to $2.00 per share following announcements concerning the resignation of its Chairman of the Board and losses related to debt issued by Lehman Brothers.
Name (Stock Symbol)
Federal Agricultural Mortgage Corporation (Farmer Mac) (AGM)
Federal Agricultural Mortgage Corporation provides agricultural real estate and rural housing mortgage loans in the secondary market in the United States.
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