Fannie Mae 2012 Annual Report Download - page 341

FANNIE MAE
(In conservatorship)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
F-107
Sections 12(a)(2) and 15 of the Securities Act of 1933. Lead plaintiffs also allege that we, certain of our former officers, and
our outside auditor, violated Sections 10(b) (and Rule 10b-5 promulgated thereunder) and 20(a) of the Securities Exchange
Act of 1934. Lead plaintiffs seek various forms of relief, including rescission, damages, interest, costs, attorneys’ and experts’
fees, and other equitable and injunctive relief. On October 13, 2009, the Court entered an order allowing FHFA to intervene.
In 2009, the Court granted the defendants’ motion to dismiss the Securities Act claims as to all defendants. In 2010, the Court
granted in part and denied in part the defendants’ motions to dismiss the Securities Exchange Act claims. As a result of the
partial denial, some of the Securities Exchange Act claims remained pending against us and certain of our former officers.
Fannie Mae filed its answer to the consolidated complaint on December 31, 2010. In 2011, lead plaintiffs filed motions to
certify a class of persons who, between November 8, 2006 and September 5, 2008, inclusive, purchased or acquired
(a) Fannie Mae common stock and options or (b) Fannie Mae preferred stock.
Plaintiffs filed a second amended joint consolidated class action complaint on March 2, 2012 and added FHFA as a
defendant. On August 30, 2012, the court denied defendants’ motions to dismiss the second amended complaint, allowing
plaintiffs’ Securities Exchange Act claims premised on Fannie Mae’s subprime and Alt-A disclosures to proceed along with
plaintiffs’ claims premised on Fannie Mae’s risk management disclosures. Fannie Mae filed its answer to the second amended
complaint on October 29, 2012. Discovery is ongoing.
Given the stage of this lawsuit, the absence of a specified demand or claim by the plaintiff, and the substantial and novel legal
questions that remain, we are currently unable to estimate the reasonably possible loss or range of loss arising from this
litigation.
In re 2008 Fannie Mae ERISA Litigation
In a consolidated complaint filed in 2009, plaintiffs allege that certain of our current and former officers and directors,
including former members of Fannie Mae’s Benefit Plans Committee and the Compensation Committee of Fannie Mae’s
Board of Directors, as fiduciaries of Fannie Mae’s Employee Stock Ownership Plan (“ESOP”), breached their duties to ESOP
participants and beneficiaries by investing ESOP funds in Fannie Mae common stock when it was no longer prudent to
continue to do so. Plaintiffs purport to represent a class of participants and beneficiaries of the ESOP whose accounts
invested in Fannie Mae common stock beginning April 17, 2007. The plaintiffs seek unspecified damages, attorneys’ fees and
other fees and costs, and injunctive and other equitable relief. On February 1, 2012, plaintiffs sought leave to amend their
complaint to add new factual allegations and the court granted plaintiffs’ motion. Plaintiffs filed an amended complaint on
March 2, 2012 adding two current Board members and then-CEO Michael J. Williams as defendants. On October 22, 2012,
the court granted in part and denied in part defendants’ motions to dismiss. The court dismissed with prejudice claims against
seven former and current directors and officers who joined the Board of Directors or Benefit Plans Committee after Fannie
Mae was placed into conservatorship. The court allowed plaintiffs’ breach of fiduciary duty and failure to monitor claims to
go forward, but dismissed plaintiffs’ conflict of interest claim. Discovery is ongoing.
Given the stage of this lawsuit, the absence of a specified demand or claim by the plaintiff, and the substantial and novel legal
questions that remain, we are currently unable to estimate the reasonably possible loss or range of loss arising from this
litigation.
Comprehensive Investment Services v. Mudd, et al.
This individual securities action was originally filed on May 13, 2009, by plaintiff Comprehensive Investment Services, Inc.
against certain of our former officers and directors, and certain of our underwriters in the U.S. District Court for the Southern
District of Texas. On July 7, 2009, this case was transferred to the Southern District of New York for coordination with In re
Fannie Mae 2008 Securities Litigation and In re 2008 Fannie Mae ERISA Litigation. Plaintiff filed an amended complaint on
May 11, 2011 against us, certain of our former officers, and certain of our underwriters. The amended complaint alleges
violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder; violations of
Section 20(a) of the Securities Exchange Act of 1934; and violations of the Texas Business and Commerce Code, common
law fraud, and negligent misrepresentation in connection with Fannie Mae’s May 2008 $2.0 billion offering of 8.25% non-
cumulative preferred Series T stock. Plaintiff seeks relief in the form of rescission, actual damages, punitive damages,
interest, costs, attorneys’ and experts’ fees, and other equitable and injunctive relief. Plaintiff filed a second amended
complaint on March 2, 2012. On August 30, 2012, the court denied defendants’ motions to dismiss the second amended
complaint, allowing plaintiff’s Securities Exchange Act claims premised on Fannie Mae’s subprime and Alt-A disclosures
and risk management disclosures to proceed. The court granted defendants’ motions to dismiss the state law claims, as well as
the federal claims based on alleged violations of GAAP, and also dismissed two of our former officers from the action. On