Fannie Mae, the largest buyer of U.S. home loans, was accused of securities fraud by Ohio Attorney General Jim Petro, who said the company manipulated its earnings to artificially inflate its stock price.

"These defendants manipulated earnings in a fraudulent scheme to deceive investors about Fannie Mae's true financial state," Petro said in a written statement. "This deception could cost shareholders billions of dollars."

The suit was filed on behalf of the Ohio Public Employees Retirement System, the State Teachers Retirement System of Ohio and the Ohio Bureau of Workers' Compensation. Petro is seeking class-action status for the suit, which would enable him to proceed on behalf of holders of Fannie Mae shares from Oct. 11, 2000, through Sept. 22, 2004, the period of the alleged fraud.

Fannie Mae chief executive Franklin D. Raines, Chief Financial Officer J. Timothy Howard and Controller Leanne Spencer are accused of manipulating the stock through false public financial statements. All three were named as defendants.

The suit comes after Fannie Mae's regulator, the Office of Federal Housing Enterprise Oversight, said the government-chartered company violated accounting rules related to its $905 billion mortgage portfolio. The Securities and Exchange Commission began a formal probe last month.

Petro's suit was filed in U.S. District Court for the Southern District of Ohio in Columbus. Other shareholder suits have been filed in Washington and New York federal courts.

Brian Faith, a Fannie Mae spokesman, declined to comment on the suit.