Fannie Mae 2006 Annual Report Download - page 317

The plaintiffs filed an amended complaint on September 1, 2006. Among other things, the amended complaint
added The 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
and on May 31, 2007, the court issued a Memorandum Opinion and Order dismissing plaintiffs’ derivative
lawsuit for failing to make a demand on the Board of Directors or to plead specific facts demonstrating that
such a demand was excused based upon futility. On June 27, 2007, plaintiffs filed a Notice of Appeal with the
U.S. Court of Appeals for the District of Columbia.
On June 29, 2007, one of the original plaintiffs (James Kellmer) in the derivative action filed a new derivative
action in the U.S. District Court for the District of Columbia. Mr. Kellmer had originally filed a shareholder
derivative action on January 10, 2005, which was later consolidated into the main derivative case.
Mr. Kellmer’s new complaint alleges that he made a demand on the Board of Directors on September 24,
2004, and that his action should now be allowed to proceed independently. In addition to naming all of the
defendants who were named in the amended consolidated complaint, Mr. Kellmer names the following new
defendants: James Johnson, Lawrence Small, Jamie Gorelick, Victor Ashe, Molly Bordonaro, William Harvey,
Taylor Segue, III, Manuel Justiz, Vincent Mai, Roger Birk, Stephen Friedman, Garry Mauro, Maynard
Jackson, Esteban Torres, KPMG LLP and The Goldman Sachs Group, Inc.
The factual allegations in Mr. Kellmer’s complaint are largely duplicative of those in the amended
consolidated complaint and it alleges causes of action against the current and former officers and directors
based on theories of breach of fiduciary duty, indemnification, negligence, violations of the Sarbanes-Oxley
Act of 2002 and unjust enrichment. The complaint seeks unspecified money damages, including legal fees and
expenses, disgorgement and punitive damages, as well as injunctive relief.
In addition, another derivative action, based on Mr. Kellmer’s alleged September 24, 2004 demand was filed
on July 6, 2007 by Arthur Middleton in the United States District Court for the District of Columbia. This
complaint names the following current and former officers and directors as defendants: Franklin D. Raines,
J. Timothy Howard, Daniel H. Mudd, Kenneth M. Duberstein, Stephen B. Ashley, Thomas P. Gerrity, Ann
Korologos, Frederic V. Malek, Donald B. Marron, Joe K. Pickett, Leslie Rahl, H. Patrick Swygert, Anne M.
Mulcahy, John K. Wulff, The Goldman Sachs Group, Inc. and Goldman Sachs & Co. The allegations in this
new complaint are essentially identical to the allegations in the amended consolidated complaint referenced
above, and this plaintiff seeks the same relief.
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. 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 and the other defendants filed motions to dismiss the consolidated
complaint. These motions were denied on May 8, 2007.
F-86
FANNIE MAE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)