Fannie Mae 2011 Annual Report Download - page 368

FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
business or financial condition. We have advanced fees and expenses of certain current and former officers and
directors in connection with various legal proceedings pursuant to indemnification agreements.
In re Fannie Mae Securities Litigation
Fannie Mae is a defendant in a consolidated class action lawsuit initially filed in 2004 and currently pending in
the U.S. District Court for the District of Columbia. In the consolidated complaint filed on March 4, 2005, lead
plaintiffs Ohio Public Employees Retirement System and State Teachers Retirement System of Ohio allege that
we and certain former officers, as well as our former outside auditor, made materially false and misleading
statements in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and SEC Rule 10b-5
promulgated thereunder. Plaintiffs contend that Fannie Mae’s accounting statements were inconsistent with
GAAP requirements relating to hedge accounting and the amortization of premiums and discounts, and seek
unspecified compensatory damages, attorneys’ fees, and other fees and costs. On January 7, 2008, the court
defined the class as all 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 October 17,
2008, FHFA, as conservator for Fannie Mae, intervened in this case. On August 18, 2011, the parties filed
various motions for summary judgment, which are fully briefed.
On October 7, 2011, FHFA, as conservator, filed a motion to stay this case for the duration of our
conservatorship based on a regulation FHFA adopted on June 20, 2011, which provides in part that while we are
in conservatorship, FHFA will not pay claims by our current or former shareholders, unless the Director of FHFA
determines it is in the interest of the conservatorship. The Acting Director of FHFA has determined it will not
pay the claims asserted in this case while we are in conservatorship. FHFA maintains, therefore, that continuing
litigation of this matter would be a waste of resources. FHFA’s motion was denied on November 14, 2011.
FHFA’s regulation has been challenged by lead plaintiffs in a separate lawsuit also pending in the U.S. District
Court for the District of Columbia.
In September and December, 2010, plaintiffs served expert reports claiming damages to plaintiffs under various
scenarios ranging cumulatively from $2.2 billion to $8.6 billion. Given the substantial and novel legal questions
that remain, including those raised by FHFA’s regulation and the Director of FHFA’s determination, we are
currently unable to estimate the reasonably possible loss or range of loss arising from this litigation.
2008 Class Action Lawsuits
Fannie Mae is a defendant in two consolidated class actions filed in 2008 and currently pending in the
U.S. District Court for the Southern District of New York—In re Fannie Mae 2008 Securities Litigation and In
re 2008 Fannie Mae ERISA Litigation. On February 11, 2009, the Judicial Panel on Multidistrict Litigation
ordered that the cases be coordinated for pretrial proceedings.
Given the early status of these matters, the absence of a specified demand or claim by the plaintiffs, and the
substantial and novel legal questions that remain, including those raised by FHFA’s regulation and the Director
of FHFA’s determination, we are currently unable to estimate the reasonably possible loss or range of loss arising
from these lawsuits.
In re Fannie Mae 2008 Securities Litigation
In a consolidated complaint filed on June 22, 2009, lead plaintiffs Massachusetts Pension Reserves Investment
Management Board and Boston Retirement Board (for common shareholders) and Tennessee Consolidated
Retirement System (for preferred shareholders) allege that we, certain of our former officers, and certain of our
underwriters violated Sections 12(a)(2) and 15 of the Securities Act of 1933. Lead plaintiffs also allege that we,
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