There was a classic moment on Abbott and Costello's old-time TV show when Costello asked Abbott if balloons were made of hot air. Abbott answered that they were, to which Costello followed by asking Abbott why he didn't float. Abbott responded with a much-deserved slap across Costello's face.
I recalled that exchange last week when reading a press release issued by the office of Marc Dann, attorney general for Ohio. Dann, a Democrat, filed a securities fraud class action lawsuit against Freddie Mac on behalf of the Ohio Public Employees Retirement System (OPERS), alleging the government-sponsored enterprise ‘secretly and intentionally participated in one of the largest housing investment deceptions in modern U.S. economic times.’
My comparison between Dann and Abbott and Costello has nothing to do with any perceived humor in the lawsuit – Dann alleges OPERS' losses could be as high as $27.2 million, which is not funny. My problem comes in the hot air manner that Dann is presenting himself in this case, especially in view of Dann's less-than-stellar record in office. Indeed, I am wondering why Dann isn't floating away.
According to the press release from Dann's office: ‘This lawsuit is evidence of the Attorney General's commitment on behalf of Ohio's pension funds to recover billions of dollars lost as a result of the collapse of the subprime mortgage industry. OPERS was the Lead Plaintiff in an earlier case against Freddie Mac and won a $410 million settlement in that case.’
The earlier Freddie Mac case, for the record, had absolutely nothing to do with subprime chicanery. That case, settled in April 2006, was the result of Freddie Mac's egregious accounting mistakes relating to its earnings. However, Dann was not leading the charge in that case – the Ohio attorney general at the time was Jim Petro, Dann's Republican predecessor (whose work was absent from the press release).
The press release gets better (and I am not editing out the run-ons – this is how it was sent): ‘'I would like to commend the trustees and staff at OPERS for supporting my effort to hold Freddie Mac accountable for the role the company and its top executives played in bilking investors and fueling the foreclosure crisis that is destroying neighborhoods across our state and the entire nation,' Mr. Dann said. 'By authorizing me to bring this suit on their behalf they are protecting the interests of the pension plan, the workers and retirees who depend upon it, and the taxpayers whose hard-earned dollars fund it. And they are also sending a loud and clear message to Wall Street that this type of fraud and manipulation will not be tolerated by the people who live on the Main Streets that are being devastated by what Freddie Mac has done.'’
Huh? Did you know that Freddie Mac is solely responsible for the subprime crisis that's devastating the economy? Or that Wall Street is going to shiver thanks to the Ohio attorney general's defense of his state government's pension fund?
I must be reading the wrong newspapers, because this information is completely alien to me. But maybe I'm not alone – neither the federal Department of Justice nor the other 49 state attorneys general nor any banking regulators are jumping on Dann's creaky legal bandwagon to wage war against Freddie Mac.
So what kind of an attorney general would initiate such a lawsuit? For those who are unfamiliar with Dann (he was elected in 2006, winning 52% of the state vote), I'd like to share some interesting facts on his first year in office:
- His deputy security director was forced to quit when a routine background check turned up an involuntary manslaughter conviction.
- His top law enforcement official was still drawing pay from the Youngstown Police Department while on the state payroll (that's against the law!).
- His internal auditor (the guy responsible for all of those messy dollars and cents flowing into the attorney general's office) let his CPA license lapse a decade ago.
- Dann personally spent more than $40,000 in taxpayer dollars to buy a gas-guzzling sports-utility vehicle from a campaign donor's dealership.
- Last summer, the Warren Tribune Chronicle printed an article on how Dann used his influence to get a government job for a 22-year-old woman who grew up with Dann as her legal guardian. While Dann's action was not illegal, it smacked of nepotism. Dann responded to the news by confronting the reporter in the street with the suggestion that the journalist perform an anatomically impossible act. The bleep-free video of that exchange is on YouTube.
Wow, even Abbott and Costello couldn't come up with a record like that!
If I were on the Freddie Mac team, I wouldn't worry too much about this lawsuit. Because when it comes to the office of Ohio's attorney general's grasp of the secondary market (let alone his grasp on running a law enforcement agency), you need to wonder who's on first.
– Phil Hall, editor, Secondary Marketing Executive
(Please address all comments regarding this opinion column to hallp@sme-online.com)
