Fannie Mae 2008 Annual Report Download - page 406

Agnes Derivative Litigation
On June 25, 2008, L. Jay Agnes filed a shareholder derivative complaint in the U.S. District Court for the
District of Columbia against certain of our current and former directors and officers, Fannie Mae as a nominal
defendant, Washington Mutual, Inc., Kerry K. Killinger; Countrywide Financial Corporation and its
subsidiaries and/or affiliates, Countrywide Home Loans, Inc., Countrywide Home Equity Loan Trust, and
Countrywide Bank, FSB, LandSafe, Inc., Angelo R. Mozilo; First American Corporation, First American
eAppraiseIt, Anthony R. Merlo, Jr., and Goldman Sachs Group, Inc.
The complaint alleges two general categories of derivative claims purportedly on our behalf against the current
and former Fannie Mae officer and director defendants. First, it alleges illegal accounting manipulations
occurring from approximately 1998 through 2004, or pre-2005 claims, which is based on the May 2006
OFHEO Report and is largely duplicative of the allegation contained in the existing derivative actions. Second,
it makes allegations similar to those in the Arthur Derivative Litigation that was filed in November 2007 and
described above. Specifically the complaint contends that the current and former Fannie Mae officer and
director defendants irresponsibly engaged in “highly speculative real estate transactions” and concealed the
extent of the Company’s exposure to the subprime mortgage crisis, while wasting Company assets by causing
it to repurchase its own shares at inflated prices at the same time that certain defendants sold their personally
held shares. Based upon these allegations, the complaint asserts causes of action against the current and
former Fannie Mae officer and director defendants for breach of fiduciary duty, indemnification, negligence,
unjust enrichment, and violations of Section 304 of the Sarbanes-Oxley Act of 2002.
In addition, Mr. Agnes asserts a direct claim on his own behalf under Section 14(a) of the Securities Exchange
Act of 1934 and SEC Rule 14a-9 based upon allegations that the Company’s 2008 Proxy Statement was
intentionally false and misleading and concealed material facts in order that members of the Board could
remain in control of the company.
The complaint seeks a declaration that the current and former officer and director defendants breached their
fiduciary duties; a declaration that the election of directors pursuant to the 2008 Proxy Statement is null and
void; a new election of directors; an accounting for losses and damages to us as a result of the alleged
misconduct; disgorgement; unspecified compensatory damages; punitive damages; attorneys’ fees, and other
fees and costs; as well as injunctive relief directing us to reform our corporate governance and internal control
procedures. 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
January 18, 2009, the Court entered an order extending the time for all defendants, except Washington Mutual,
Inc., to respond to the complaint through May 5, 2009. On February 2, 2009, FHFA filed a motion to
substitute itself for Mr. Agnes with respect to Mr. Agnes’ derivative claims, and to consolidate Mr. Agnes’
direct claim with those in In re Fannie Mae Securities Litigation described above. On February 13, 2009,
Mr. Agnes filed an opposition to FHFA’s motion to substitute.
ERISA Actions
In re Fannie Mae ERISA Litigation (formerly David Gwyer v. Fannie Mae)
On October 14, 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 5,
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 16, 2005. The
plaintiffs in this consolidated ERISA-based lawsuit purport to represent a class of participants in our
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FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)