Fannie Mae 2006 Annual Report Download - page 54

held or serviced by us. The complaint identified as a class low- and moderate-income apartment building
developers who maintained uninvested escrow accounts with us or our servicer. Plaintiffs Casa Orlando
Apartments, Ltd., Jasper Housing Development Company, and the Porkolab Family Trust No. 1 allege that we
violated fiduciary obligations that they contend we owe to borrowers with respect to certain escrow accounts
and that we were unjustly enriched. In particular, plaintiffs contend that, starting in 1969, we misused these
escrow funds and are therefore liable for any economic benefit we received from the use of these funds.
Plaintiffs seek a return of any profits, with accrued interest, earned by us related to the escrow accounts at
issue, as well as attorneys’ fees and costs.
Our motions to dismiss and motion for summary judgment were denied on March 10, 2005. We filed a partial
motion for reconsideration of our motion for summary judgment, which was denied on February 24, 2006.
Plaintiffs have filed an amended complaint and a motion for class certification, which was fully briefed and
remains pending.
We believe we have defenses to the claims in this lawsuit and intend to defend this lawsuit vigorously.
KPMG Litigation
Fannie Mae v. KPMG LLP
On December 12, 2006, we filed suit against KPMG LLP, our former outside auditor, in the Superior Court of
the District of Columbia. The complaint alleges state law negligence and breach of contract claims related to
certain audit and other services provided by KPMG. We are seeking compensatory damages in excess of
$2 billion to recover costs related to our restatement and other damages. On December 12, 2006, KPMG
removed the case to the U.S. District Court for the District of Columbia. KPMG filed a motion to dismiss our
complaint, which was denied on June 13, 2007. On June 13, 2007, the court granted KPMG’s motion to
consolidate this action with In re Fannie Mae Securities Litigation for pretrial purposes.
See “Restatement-Related Matters—Securities Class Action Lawsuits—In re Fannie Mae Securities
Litigation,” for a discussion of KPMG’s cross claims against us.
Item 4. Submission of Matters to a Vote of Security Holders
None.
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