Fannie Mae 2006 Annual Report Download - page 53

May 30, 2006. The final judgment was entered by the U.S. District Court of the District of Columbia on
August 9, 2006.
OTHER LEGAL PROCEEDINGS
Former CEO Arbitration
On September 19, 2005, Franklin D. Raines, our former Chairman and Chief Executive Officer, initiated
arbitration proceedings against Fannie Mae before the American Arbitration Association. On April 10, 2006,
the parties convened an evidentiary hearing before the arbitrator. The principal issue before the arbitrator was
whether we were permitted to waive a requirement contained in Mr. Raines’s employment agreement that he
provide six months notice prior to retiring. On April 24, 2006, the arbitrator issued a decision finding that we
could not unilaterally waive the notice period, and that the effective date of Mr. Raines’s retirement was
June 22, 2005, rather than December 21, 2004 (his final day of active employment). Under the arbitrator’s
decision, Mr. Raines’s election to receive an accelerated, lump-sum payment of a portion of his deferred
compensation must now be honored. Moreover, we must pay Mr. Raines any salary and other compensation to
which he would have been entitled had he remained employed through June 22, 2005, less any pension
benefits that Mr. Raines received during that period. On November 7, 2006, the parties entered into a consent
award, which partially resolved the issue of amounts due Mr. Raines. In accordance with the consent award,
we paid Mr. Raines $2.6 million on November 17, 2006. By agreement, final resolution of the unresolved
issues was deferred until after our accounting restatement results were announced. On June 26, 2007, counsel
for Mr. Raines notified the arbitrator that the parties have been unable to resolve the following issues:
Mr. Raines’s entitlement to additional shares of common stock under our performance share plan for the
three-year performance share cycle that ended in 2003; Mr. Raines’s entitlement to shares of common stock
under our performance share plan for the three-year performance share cycles that ended in each of 2004,
2005 and 2006; and Mr. Raines’s entitlement to additional compensation of approximately $140,000.
Antitrust Lawsuits
In re G-Fees Antitrust Litigation
Since January 18, 2005, we have been served with 11 proposed class action complaints filed by single-family
borrowers that allege that we and Freddie Mac violated the Clayton and Sherman Acts and state antitrust and
consumer protection statutes by agreeing to artificially fix, raise, maintain or stabilize the price of our and
Freddie Mac’s guaranty fees. Two of these cases were filed in state courts. The remaining cases were filed in
federal court. The two state court actions were voluntarily dismissed. The federal court actions were
consolidated in the U.S. District Court for the District of Columbia. Plaintiffs filed a consolidated amended
complaint on August 5, 2005. Plaintiffs in the consolidated action seek to represent a class of consumers
whose loans allegedly “contain a guarantee fee set by” us or Freddie Mac between January 1, 2001 and the
present. The consolidated amended complaint alleges violations of federal and state antitrust laws and state
consumer protection and other laws. Plaintiffs seek unspecified damages, treble damages, punitive damages,
and declaratory and injunctive relief, as well as attorneys’ fees and costs.
We and Freddie Mac filed a motion to dismiss on October 11, 2005. The motion to dismiss has been fully
briefed and remains pending. On June 12, 2007, we and Freddie Mac filed a supplemental memorandum in
support of the October 11, 2005 motion to dismiss.
We believe we have defenses to the claims in these lawsuits and intend to defend these lawsuits vigorously.
Escrow Litigation
Casa Orlando Apartments, Ltd., et al. v. Federal National Mortgage Association (formerly known as Medlock
Southwest Management Corp., et al. v. Federal National Mortgage Association)
A complaint was filed against us in the U.S. District Court for the Eastern District of Texas (Texarkana
Division) on June 2, 2004, in which plaintiffs purport to represent a class of multifamily borrowers whose
mortgages are insured under Sections 221(d)(3), 236 and other sections of the National Housing Act and are
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