Federal National Mortgage Association (Fannie Mae) (NYSE: FNM) Investor Securities Class Action Lawsuit 09/08/2008

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Company Name(s): 
Fannie Mae
Case Name: 
Fannie Mae Shareholder Class Action Lawsuit 09/08/2008
Case Status: 
Lawsuit Filed
Case Status: 
Settlement Approved
Affected Securities
NYSE: FNM
Lawsuit Overview
Type of Lawsuit: 
Shareholder Class Action
Date Filed: 
09/08/2008
Class Period Begin: 
11/08/2006
Class Period End: 
09/05/2008
Court of Filing: 
U.S. District Court for the Southern District of New York
Date Settled: 
03/03/2015
Settlement Amount: 
$170,000,000
Deadline to Participate in Settlement: 
04/03/2015
Summary: 

This settlement is in relation to (i) the purchase or other acquisition of Fannie Mae common stock and Fannie Mae call options; (ii) the sale of Fannie Mae common stock put options; and (iii) the purchase or other acquisition of Fannie Mae preferred stock

March 3, 2015 - The court approved the settlement, entered the orders approving the plan of allocation, the motion for attorneys’ fees and expenses, and dismissed the action with prejudice.

November 12, 2014 - The court preliminarily approved the settlement.

October 24, 2014 - Parties filed a stipulation of settlement.

August 30, 2012 - The court granted in part and denied in part the defendants' motions to dismiss.

April 4, 2012 - The defendants filed motions to dismiss.

March 2, 2012 - The lead plaintiffs filed a second amended complaint.

September 30, 2010 - The court granted in part and denied in part the defendants' motions to dismiss.

September 18, 2009 - More defendants filed additional motions to dismiss.

July 13, 2009 - The defendants filed a motion to dismiss.

June 22, 2009 - The lead plaintiffs filed an amended consolidated complaint on behalf of investors who purchased Federal National Mortgage Association (Fannie Mae) (NYSE: FNM) common shares between November 8, 2007 and September 5, 2008. The lead plaintiffs allege that the defendants violated the Securities Act of 1933 and the Securities Exchange Act of 1934 by issuing false and misleading statements between November 8, 2007 and September 5, 2008.

April 16, 2009 - The lead plaintiff and lead counsel were appointed and all cases were consolidated.

November 7, 2008 - Lead plaintiff motions were filed.

September 8, 2008 - An investor in shares of Federal National Mortgage Association (Fannie Mae) (NYSE: FNM) filed a lawsuit in the U.S. District Court for the Southern District of New York against Federal National Mortgage Association (Fannie Mae) over alleged violations of Federal Securities Laws between November 16, 2007 and September 5, 2008.

The complaint charges certain of Federal National Mortgage Association (Fannie Mae)’s officers and/or directors with violations of the Securities Exchange Act of 1934. Federal National Mortgage Association (Fannie Mae) is a shareholder-owned, government-sponsored enterprise of the United States federal government that is authorized to make loans and loan guarantees. It is the leading market-maker in the U.S. secondary mortgage market, which helps to replenish the supply of money for mortgages and enables money to be available for housing purchases.

The complaint alleges that between November 16, 2007 and September 5, 2008, defendants made materially false and misleading statements aboutFederal National Mortgage Association (Fannie Mae)’s business and prospects and misrepresented the company’s financial statements. These false and misleading statements cause Federal National Mortgage Association (Fannie Mae)’s stock (NYSE: FNM) to trade at artificially inflated prices, reaching as high as $40.69 per share.

On July 7, 2008, a financial analyst at Lehman Brothers published a report suggesting that Federal National Mortgage Association (Fannie Mae) might need to raise as much as $46 billion in capital, causing the company’s stock price to plummet 16% in a single trading day. Following that disclosure, former St. Louis Federal Reserve Board President, William Poole, suggested that Federal National Mortgage Association (Fannie Mae) was nearly insolvent and The New York Times disclosed that the federal government was making plans to place Federal National Mortgage Association (Fannie Mae) into a conservatorship. On July 13, 2008, the Treasury Department announced that it was making a temporary line of credit available to Fannie Mae and would purchase an equity stake if necessary to provide more capital. From July 7 through July 14, 2008, (NYSE: FNM) stock price declined over 48%. Finally, on Sunday, September 7, 2008, in the biggest government bail out in U.S. history, federal regulators seized control of Fannie Mae. On September 8, 2008, Federal National Mortgage Association (Fannie Mae) (NYSE: FNM) stock opened at $1.91 per share, down from a close of $7.04 per share on September 5, 2008, a 72% decline.

According to the complaint, the true facts, which were known by the defendants but concealed from the investing public between November 16, 2007 and September 5, 2008, were as follows: (a) the decline in the U.S. housing market rendered Federal National Mortgage Association (Fannie Mae) undercapitalized; (b) Federal National Mortgage Association (Fannie Mae)’s December 2007 capital raise did not meet its capital needs; (c) Federal National Mortgage Association (Fannie Mae)’s May 2008 capital raise did not meet its capital needs; (d) although Federal National Mortgage Association (Fannie Mae) had more capital than its regulator required, it did not have “surplus capital” as defendants claimed; and (e) Federal National Mortgage Association (Fannie Mae)’s publicly disclosed financial results misrepresented the financial condition of the company.