Fannie Mae 2005 Annual Report Download - page 56

and against us as a nominal defendant. Plaintiffs contend that the defendants purposefully misapplied GAAP,
maintained poor internal controls, issued a false and misleading proxy statement, and falsified documents to
cause our financial performance to appear smooth and stable, and that Fannie Mae was harmed as a result.
The claims are for breaches of the duty of care, breach of fiduciary duty, waste, insider trading, fraud, gross
mismanagement, violations of the Sarbanes-Oxley Act of 2002 and unjust enrichment. Plaintiffs seek
compensatory damages, punitive damages, attorneys’ fees, and other fees and costs, as well as injunctive relief
related to the adoption by us of certain proposed corporate governance policies and internal controls.
All of these individual actions have been consolidated into the U.S. District Court for the District of Columbia
and the court entered an order naming Pirelli Armstrong Tire Corporation Retiree Medical Benefits Trust and
Wayne County Employees’ Retirement System as co-lead plaintiffs. A consolidated complaint was filed on
September 26, 2005. The consolidated complaint named the following current and former officers and directors
as defendants: Franklin D. Raines, J. Timothy Howard, Thomas P. Gerrity, Frederick V. Malek, Joe K. Pickett,
Anne M. Mulcahy, Daniel H. Mudd, Kenneth M. Duberstein, Stephen B. Ashley, Ann McLaughlin Korologos,
Donald B. Marron, Leslie Rahl, H. Patrick Swygert and John K. Wulff.
When document production commenced in In re Fannie Mae Securities Litigation, we agreed to simulta-
neously provide our document production from that action to the plaintiffs in the shareholder derivative action.
All of the defendants filed motions to dismiss the action on December 14, 2005. These motions were fully
briefed but not ruled upon. In the interim, the plaintiffs filed an amended complaint on September 1, 2006,
thus mooting the previously filed motions to dismiss. Among other things, the amended complaint added
Goldman Sachs Group Inc., Goldman, Sachs & Co., Inc., Lehman Brothers Inc. and Radian Insurance Inc. as
defendants, added allegations concerning the nature of certain transactions between these entities and Fannie
Mae, added additional allegations from OFHEO’s May 2006 report on its special examination and the Paul
Weiss report, and added other additional details. The plaintiffs have since voluntarily dismissed those newly
added third-party defendants. We filed motions to dismiss the first amended complaint on October 20, 2006,
which motions are still pending.
ERISA Action
In re Fannie Mae ERISA Litigation (formerly David Gwyer v. Fannie Mae)
Three ERISA-based cases have been filed against us, our Board of Directors’ Compensation Committee, and
against the following former and current officers and directors: Franklin D. Raines, J. Timothy Howard, Daniel
H. Mudd, Vincent A. Mai, Stephen Friedman, Anne M. Mulcahy, Ann McLaughlin Korologos, Joe K. Pickett,
Donald B. Marron, Kathy Gallo and Leanne Spencer.
On October 15, 2004, David Gwyer filed a class action complaint in the U.S. District Court for the District of
Columbia. Two additional class action complaints were filed by other plaintiffs on May 6, 2005 and May 10,
2005. All of these cases were consolidated on May 24, 2005 in the U.S. District Court for the District of
Columbia. A consolidated complaint was filed on June 15, 2005. The plaintiffs in the consolidated ERISA-
based lawsuit purport to represent a class of participants in our ESOP between January 1, 2001 and the
present. Their claims are based on alleged breaches of fiduciary duty relating to accounting matters discussed
in our SEC filings and in OFHEO’s interim report. Plaintiffs seek unspecified damages, attorneys’ fees, and
other fees and costs, and other injunctive and equitable relief. We filed a motion to dismiss the consolidated
complaint on June 29, 2005. Our motion and all of the other defendants’ motions to dismiss were fully briefed
and argued on January 13, 2006. As of the date of this filing, these motions are still pending. When document
production commenced in In re Fannie Mae Securities Litigation, we agreed to simultaneously provide our
document production from that action to the plaintiffs in the ERISA actions.
We believe we have defenses to the claims in these lawsuits and intend to defend these lawsuits vigorously.
51