Court Denies Damages to Fannie Mae Shareholders

WASHINGTON (CN) - Shareholders of Fannie Mae are unable to collect damages from company officers after the largest corporate earnings restatement in U.S. history, the D.C. Circuit ruled.

The Pirelli Armstrong Tire Corp. Retiree Medical Plan and other Fannie Mae shareholders sued Franklin Raines and other Fannie Mae leaders, alleging that the officers failed in their duty to prevent the accounting irregularities.

Judge Kavanaugh agreed with the trial court's dismissal of the shareholders' claims. He ruled they did not meet Delaware's high standard for cases where the shareholders do not demand that the corporation pursues the claims itself.

Also, "under Delaware law, directors are insulated from liability when they rely in good faith on the opinions of outside experts (accountants, in this case) who are acting within their expertise," Kavanaugh ruled.

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