Fannie Mae 2008 Annual Report Download - page 405

dismissal order does not apply to his January 10, 2005 action, and that his case can now proceed. This motion
is pending.
On June 29, 2007, Mr. Kellmer also filed a new derivative action in the U.S. District Court for the District of
Columbia. Mr. Kellmer’s new complaint alleges that he made a demand on the Board of Directors on
September 24, 2004, and that this new action should now be allowed to proceed. On December 18, 2007,
Mr. Kellmer filed an amended complaint that narrowed the list of named defendants to certain of our current
and former directors, Goldman Sachs Group, Inc. and us, as a nominal defendant. The factual allegations in
Mr. Kellmer’s 2007 amended complaint are largely duplicative of those in the amended consolidated
complaint and his amended complaint’s claims are based on theories of breach of fiduciary duty,
indemnification, negligence, violations of the Sarbanes-Oxley Act of 2002 and unjust enrichment. His
amended complaint seeks unspecified money damages, including legal fees and expenses, disgorgement and
punitive damages, as well as injunctive relief.
In addition, on July 6, 2007, Arthur Middleton filed a derivative action in the U.S. District Court for the
District of Columbia that is also based on Mr. Kellmer’s alleged September 24, 2004 demand. This complaint
names as defendants certain of our current and former officers and directors, the Goldman Sachs Group, Inc.,
Goldman, Sachs & Co. and us, as a nominal defendant. The allegations in this new complaint are essentially
identical to the allegations in the amended consolidated complaint referenced above, and this plaintiff seeks
identical relief.
On July 27, 2007, Mr. Kellmer filed a motion to consolidate these two new derivative cases and to be
appointed lead counsel. We filed a motion to dismiss Mr. Middleton’s complaint for lack of standing on
October 3, 2007, and a motion to dismiss Mr. Kellmer’s 2007 complaint for lack of subject matter jurisdiction
on October 12, 2007. These motions are fully briefed and remain pending. In addition, on October 17, 2008,
FHFA, as conservator for Fannie Mae, intervened in the Kellmer and Middleton actions and filed a motion to
stay each. On October 20, 2008, the Court issued an order staying these cases until January 6, 2009. On
February 2, 2009, FHFA filed motions to substitute itself for plaintiffs Messrs. Kellmer and Middleton. On
February 13, 2009, Mr. Kellmer filed an opposition to FHFA’s motion to substitute.
Arthur Derivative Litigation
On November 26, 2007, Patricia Browne Arthur filed a shareholder derivative action in the U.S. District Court
for the District of Columbia against certain of our current and former officers and directors and against us as a
nominal defendant. The complaint alleges that the defendants wrongfully failed to disclose our exposure to the
subprime mortgage crisis and that this failure artificially inflated our stock price and allowed certain of the
defendants to profit by selling their shares based on material inside information; and that the Board improperly
authorized the company to buy back $100 million in shares while the stock price was artificially inflated. The
complaint alleges that the defendants violated Sections 10(b) (and Rule 10b-5 promulgated thereunder) and
20(a) of the Securities Exchange Act of 1934. It also alleges breaches of fiduciary duties; misappropriation of
information; waste of corporate assets; and unjust enrichment. The plaintiff seeks damages on behalf of the
company; 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. On
October 17, 2008, FHFA, as conservator for Fannie Mae, intervened in this action and filed a motion to stay.
On October 20, 2008, the Court issued an order staying this case until January 6, 2009. On February 2, 2009,
FHFA filed a motion to substitute itself for plaintiff Ms. Arthur. On February 13, 2009, Ms. Arthur filed an
opposition to FHFA’s motion to substitute.
F-127
FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)