Fannie Mae 2007 Annual Report Download - page 279

purchasers of Fannie Mae common stock and call options and all sellers of publicly traded Fannie Mae put
options during the period from April 17, 2001 through December 22, 2004.
On April 16, 2007, KPMG LLP, our former outside auditor and a co-defendant in the shareholder class action
suit, filed cross-claims against us in this action for breach of contract, fraudulent misrepresentation, fraudulent
inducement, negligent misrepresentation and contribution. KPMG amended these cross-claims on February 15,
2008. KPMG is seeking unspecified compensatory, consequential, restitutionary, rescissory and punitive
damages, including purported damages related to legal costs, exposure to legal liability, costs and expenses of
responding to investigations related to our accounting, lost fees, attorneys’ fees, costs and expenses. Our
motion to dismiss certain of KPMG’s cross-claims was denied.
In addition, two individual securities cases were filed by institutional investor shareholders in the U.S. District
Court for the District of Columbia. The first case was filed on January 17, 2006 by Evergreen Equity Trust,
Evergreen Select Equity Trust, Evergreen Variable Annuity Trust and Evergreen International Trust against us
and certain current and former officers and directors. The second individual securities case was filed on
January 25, 2006 by 25 affiliates of Franklin Templeton Investments against us, KPMG LLP, and certain
current and former officers and directors. On April 27, 2007, KPMG also filed cross-claims against us in this
action that are essentially identical to those it alleges in the consolidated shareholder class action case. On
June 29, 2006 and then again on August 14 and 15, 2006, the individual securities plaintiffs filed first
amended complaints and then second amended complaints. The second amended complaints each added
Radian Guaranty Inc. as a defendant.
The individual securities actions asserted various federal and state securities law and common law claims
against us and certain of our current and former officers and directors based upon essentially the same alleged
conduct as that at issue in the consolidated shareholder class action, and also assert insider trading claims
against certain former officers. Both cases sought unspecified compensatory and punitive damages, attorneys’
fees, and other fees and costs. In addition, the Evergreen plaintiffs sought an award of treble damages under
state law. The court consolidated these individual securities actions into the consolidated shareholder class
action for pretrial purposes and possibly through final judgment.
On July 31, 2007, the court dismissed all of the individual securities plaintiffs’ claims against the current and
former officer and director defendants, except for Franklin D. Raines and J. Timothy Howard. In addition, the
court dismissed the individual securities plaintiffs’ state law claims and certain of their federal securities law
claims against us, Franklin D. Raines, J. Timothy Howard and Leanne Spencer. It also limited the individual
securities plaintiffs’ insider trading claims against Franklin D. Raines, J. Timothy Howard and Leanne
Spencer. On February 12, 2008 and February 15, 2008, respectively, upon motions by the plaintiffs to dismiss
their actions, the court dismissed the individual securities plaintiffs’ separate actions without prejudice to their
rights to recover as class members in the consolidated securities class action.
Shareholder Derivative Lawsuits
In re Fannie Mae Shareholder Derivative Litigation
Beginning on September 28, 2004, ten plaintiffs filed twelve shareholder derivative actions (i.e., lawsuits filed
by shareholder plaintiffs on our behalf) in three different federal district courts and the Superior Court of the
District of Columbia against certain of our current and former officers and directors and against us as a
nominal defendant. All of these shareholder derivative 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 against certain of our current and former officers and
directors and against us as a nominal defendant. The consolidated complaint alleges that the defendants
purposefully misapplied GAAP, maintained poor internal controls, issued a false and misleading proxy
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)