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 The settlement, which requires court approval, was disclosed in a
Friday filing with the U.S. District Court in Manhattan.
It resolves shareholder allegations that Fannie Mae defrauded
shareholders and inflated its stock by issuing false and misleading
statements about its internal controls, capitalization, accounting,
and exposure to subprime and low-documentation "Alt-A" mortgages.
The settlement allocates $123.8 million to common stockholders and
$46.2 million to preferred stockholders between Nov. 8, 2006 and
Sept. 5, 2008.
Fannie Mae's market value peaked during that period at more than $60
billion. It is now $2.71 billion.
"We are pleased to put this matter behind us," Joseph Grassi, Fannie
Mae's interim general counsel, said in a statement. "This is another
sign of progress as Fannie Mae continues our focus on serving the
market and helping lenders make mortgage credit available to
qualified borrowers."
The government seized Fannie Mae and the smaller Freddie Mac
<FMCC.OB> on Sept. 7, 2008, and put them into a conservatorship
under the Federal Housing Finance Agency, where they remain.
Fannie Mae and Freddie Mac together drew about $187.5 billion of
bailout funds, but have returned roughly $218.7 billion to taxpayers
in the form of dividends.
The lead plaintiffs suing Fannie Mae are the Massachusetts Pension
Reserves Investment Management Board, the State-Boston Retirement
Board and the Tennessee Consolidated Retirement System, and are
seeking class-action status.
They said the settlement averts potential "numerous and substantial
risks" of continuing the lawsuit after similar litigation against
Freddie Mac was dismissed last year.
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"We're extremely pleased with the results, particularly in light of
the dismissal of a similar lawsuit against Fannie Mae's sibling
company, Freddie Mac," Daniel Greene, the chairman of State-Boston,
said in a statement.
The law firms Labaton Sucharow and Berman DeValerio, which represent
common stockholders, and Kaplan Fox & Kilsheimer, which represents
preferred stockholders, plan to seek fees of as much as 20 percent
of the settlement fund, court papers show.
A separate lawsuit over Fannie Mae's disclosures was brought in 2011
by the U.S. Securities and Exchange Commission against former Chief
Executive Officer Daniel Mudd and former Chief Risk Officer Enrico
Dallavecchia, and remains pending.
The SEC filed a similar lawsuit against former Freddie Mac
officials, including onetime Chief Executive Officer Richard Syron.
The case is In re: Fannie Mae 2008 Securities Litigation, U.S.
District Court, Southern District of New York, No. 08-07831.
(Reporting by Jonathan Stempel in New York; Editing by Chris Reese
and Alan Crosby)
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