Fannie Mae 2007 Annual Report Download - page 281

complaint alleges that the defendants’ actions violated Sections 10(b) and 20(a) of the Securities Exchange
Act of 1934 and SEC Rule 10b-5 promulgated thereunder. It also alleges breaches of fiduciary duty (including
duties of care, loyalty, reasonable inquiry, oversight, good faith and supervision); misappropriation of
information and breach of fiduciary duties of loyalty and good faith (specifically in connection with stock
sales); waste of corporate assets; and unjust enrichment. Plaintiff seeks damages; corporate governance
changes; equitable relief in the form of attaching, impounding or imposing a constructive trust on the
individual defendants’ assets; restitution; and attorneys’ fees and costs.
ERISA Action
In re Fannie Mae ERISA Litigation (formerly David Gwyer v. Fannie Mae)
On October 15, 2004, David Gwyer filed a proposed class action complaint in the U.S. District Court for the
District of Columbia. Two additional proposed class action complaints were filed by other plaintiffs on May 6,
2005 and May 10, 2005. These cases are based on the Employee Retirement Income Security Act of 1974
(“ERISA”) and name us, our Board of Directors’ Compensation Committee and certain of our former and
current officers and directors as defendants.
These cases were consolidated on May 24, 2005 in the U.S. District Court for the District of Columbia and a
consolidated complaint was filed on June 15, 2005. The plaintiffs in this consolidated ERISA-based lawsuit
purport to represent a class of participants in our Employee Stock Ownership Plan between January 1, 2001
and the present. Their claims are based on alleged breaches of fiduciary duty relating to accounting matters.
Plaintiffs seek unspecified damages, attorneys’ fees, and other fees and costs, and other injunctive and
equitable relief. On July 23, 2007, the Compensation Committee of our Board of Directors filed a motion to
dismiss, which remains pending.
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 concerning our
obligations under his employment agreement. On April 24, 2006, the arbitrator issued a decision regarding the
effective date of Mr. Raines’s retirement. As a result of this decision, 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 under his employment
agreement. 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 federal 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.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)