Underwriter Defendants in Securities Fraud Related to Fannie Mae Offering Charged

NEW YORK, Sept. 17, 2008 (LAWFUEL) — Pomerantz Haudek Block
Grossman & Gross LLP (www.pomerantzlaw.com) (“Pomerantz”) has filed a
class action lawsuit in the United States District Court, Southern
District of New York, against Merrill Lynch, Pierce, Fenner & Smith
Incorporated (NYSE:MER); Citigroup Global Markets, Inc. (NYSE:C);
Morgan Stanley & Co. Incorporated (NYSE:MS); UBS Securities LLC
(NYSE:UBS); and Wachovia Capital Markets LLC (NYSE:WB); (collectively,
the “Underwriter Defendants”); and four senior executives of the
company. The complaint alleges violations of Sections 10(b) and 20(a)
of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated
thereunder. The class action was filed on behalf of purchasers of the
Federal National Mortgage Association a/k/a Fannie Mae’s (“Fannie Mae”
or the “Company”) (NYSE:FNM) $2 billion offering of 8.25%
Non-Cumulative Preferred Stock, Series T (the “Offering”) that were
initially offered to the public on or about May 13, 2008 (the “Class
Period”), through September 6, 2008. The class includes investors who
purchased shares on the offering or afterwards, in the market. The
Preferred Shares traded on the New York Stock Exchange.

If you wish to serve as lead plaintiff, you must move the Court no
later than November 7, 2008.

The Offering involved the sale of approximately 80 million shares of
non-cumulative, non-convertible, perpetual fixed-rate preferred stock,
at an offering price of $25 per share. It was part of Fannie Mae’s
effort to raise at least $6 billion in new capital through public
offerings of new securities during May, 2008. The new capital was to
help shore up the Company’s balance sheet so that capital requirements
could continue to be satisfied, enhance shareholder value and provide
stability to the secondary mortgage market. Fannie Mae’s senior
officers, defendants here, repeatedly assured the marketplace that this
round of capital-raising would put the company on a sound financial
footing and that they believed that additional infusions of cash would
not be necessary for the foreseeable future.

The five Underwriter Defendants were the managing underwriters for the
Offering. As such, they participated in the review and drafting of the
Offering Circular, which was the official sales document for the
Offering, solicited sales of the shares, and identified themselves, on
the cover of the Offering Circular, as the underwriters for the
Offering. The Underwriter Defendants purchased 14 million shares each
of the Offering, delivered the Offering Circular to prospective
investors, and resold those shares to investors in the Offering.

The complaint alleges that the Underwriter Defendants’ statements made
in connection with the Offering were materially false and misleading
because (a) they grossly overstated Fannie Mae’s capitalization,
claiming that the Company had a substantial capital surplus when, in
fact, it was including on its balance sheet, at full value, about $36
billion in deferred tax assets that were, in fact, valueless; (b) they
failed to disclose the serious risk that current account changes under
consideration by the FASB could force the Company to bring over $2
trillion of currently off-balance-sheet obligations onto its financial
statements, depleting its capital surplus even further; and (c) the
individual defendants falsely asserted that management believed that
the current securities offerings of the company would be adequate to
see the Company through the end of the year.

Lead plaintiffs must meet certain legal requirements. Shareholders
outside the United States may join the action. If you wish to review a
copy of the Complaint, to discuss this action, or have any questions,
please contact Teresa L. Webb ([email protected]) of the Pomerantz Firm
at 888.476.6529 (or 888.4-POMLAW), toll free. Those who inquire by
e-mail are encouraged to include their mailing address and telephone

The Pomerantz Firm, which has offices in New York, Chicago, Washington,
D.C., Columbus, Ohio and the San Francisco Bay area, is acknowledged as
one of the premier firms in the areas of corporate, securities, and
antitrust class litigation. Founded by the late Abraham L. Pomerantz,
known as the dean of the class action bar, the Pomerantz Firm pioneered
the field of securities class actions. Today, more than 70 years later,
the Pomerantz Firm continues in the tradition he established, fighting
for the rights of the victims of securities fraud, breaches of
fiduciary duty, and corporate misconduct. The Firm has recovered
numerous multimillion-dollar damages awards on behalf of class members.

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