Fannie Fraud Case Nets $153 Million Settlement
WASHINGTON (CN) - The Federal National Mortgage Association and its former accountant, KPMG LLP, will pay a class of the state-sponsored corporation's shareholders $153 million to settle a decade-old securities fraud complaint.
The class sued Fannie Mae in 2004, claiming that it and three executives issued false and misleading financial reports and other statements that artificially inflated the price of Fannie Mae's securities.
"After nearly a decade of litigation - including more than five years of extensive discovery, multiple rounds of briefing on dispositive motions, several appeals to our Circuit Court, a constitutional challenge to a regulation in a related proceeding, and more than two years of mediation - the parties now seek final approval of a stipulated settlement agreement that would resolve this action as to the Settlement Class and constitute the largest securities class action settlement in the history of our Circuit (since the Private Securities Litigation Reform Act ... went into effect in 1996)," writes U.S District Judge Richard Leon in his ruling.
According to the ruling, the court certified the class of one million purchasers and sellers of Fannie Mae stock options in 2008.
Lead plaintiffs Ohio Public Employees Retirement System and State Teachers Retirement System of Ohio moved for approval of the settlement, which will distribute $153 million among the class and dish out $15.2 million to plaintiffs' counsel for attorneys' fees.
The settlement approval comes one year after Judge Leon ruled that the class failed to prove that retired Fannie Mae senior executive Franklin Raines was liable for securities fraud. The judge also ruled in favor of the other two officers named as defendants in the case, including former senior vice president Leanne Spencer.
"There is not only no direct evidence that Raines intended to deceive Fannie Mae's investors, there is no evidence that he even knew his statements were false," Judge Leon wrote in 2012.