In re 2008 Fannie Mae Securities Litigation
Status: Ongoing Case
We are currently litigating against Fannie Mae and other named defendants in this case that alleges violations of the securities laws by making false and misleading statements concerning Fannie Mae’s strategic shift away from investing in, guaranteeing, and securitizing low-risk traditional mortgages to risky Alt-A and subprime mortgages.
On March 9, 2009, U.S. District Judge Gerard E. Lynch for the Southern District of New York appointed Boston Retirement Board and Massachusetts Pension Reserves Investment Management Board (collectively “Massachusetts Public Pension Funds”) lead plaintiff for the stockholder class and Tennessee Consolidated Retirement System (“TCRS”) as lead plaintiff for the preferred stock class. Labaton Sucharow serves as counsel to Boston Retirement Board and co-lead counsel to the stockholder class in this action.
On June 22, 2009, lead plaintiffs filed a Joint Consolidated Class Action Complaint asserting claims under the Securities Act of 1933 (“Securities Act”) and the Securities Exchange Act of 1934 (“Exchange Act”) for the period November 8, 2006 to September 5, 2008 against Fannie Mae, certain of its current and former senior officers, its outside accountant, Deloitte & Touche, and underwriters of public offerings of Fannie Mae securities. Plaintiffs allege that the defendants violated the securities laws by making false and misleading statements concerning the Company’s strategic shift away from investing in, guaranteeing, and securitizing low-risk traditional mortgages to risky Alt-A and subprime mortgages. Defendants also misled investors by misstating Fannie Mae’s ability to gauge the risk of subprime and Alt-A loans and by misstating the adequacy of its core capital and financial statements by overstating Fannie Mae’s deferred tax assets, understating its other-than-temporary losses, and/or understating its loss reserves, all in violation of GAAP.
Fannie Mae’s material shift toward these high-risk mortgages ultimately prompted its regulator, the Federal Housing and Finance Agency (“FHFA”), to announce on September 7, 2008 that it had placed the Company into conservatorship. The first day of trading following FHFA’s announcement, Fannie Mae’s share price plummeted 90% from $7.04 to $0.73, causing billions in losses to investors, in addition to earlier losses caused by a series of partial disclosures of the Company’s fraudulent and negligent acts.
On July 13, 2009, defendants filed a joint motion to dismiss claims brought under the Securities Act. Lead plaintiffs filed their opposition to defendants’ motion on August 12, 2009, and the defendants filed a joint reply on August 27, 2009. Oral argument was held on November 16, 2009. On November 25, 2009, the Court granted defendants’ motion and dismissed lead plaintiffs’ Securities Act claims.
On September 18, 2009, defendants filed five motions to dismiss claims brought under the Exchange Act. Lead plaintiffs filed their joint opposition to defendants’ motions on November 18, 2009. Defendants filed their replies on December 18, 2009, and oral argument was held on May 27, 2010. Lead plaintiffs’ Exchange Act claims currently are pending before the Honorable Paul A. Crotty, to whom the case was reassigned on August 31, 2009.