COLUMBUS, Ohio, Nov. 19 2004 – LAWFUEL – Lawsuit, legal, attorney, law firm news — Ohio Attorney General Jim Petro
today filed a securities fraud class action lawsuit in federal court on behalf
of the State of Ohio and all other shareholders in the Federal National
Mortgage Association (Fannie Mae) (NYSE: FNM), alleging that the mortgage
buyer manipulated its earnings to artificially inflate the price of its common
stock.
Petro filed suit against Fannie Mae, one of the largest financial
institutions in the world, and its top executives in the United States
District Court, Southern District of Ohio (Eastern Division), on behalf of the
Ohio Public Employees Retirement System, State Teachers Retirement System of
Ohio, Ohio Bureau of Workers’ Compensation and all other purchasers of Fannie
Mae common stock from Oct. 11, 2000, through Sept. 22, 2004.
“These defendants manipulated earnings in a fraudulent scheme to deceive
investors about Fannie Mae’s true financial state. This deception could cost
shareholders billions of dollars,” Petro said. “STRS, OPERS and BWC are to be
congratulated for holding Fannie Mae accountable for these unscrupulous acts.”
The complaint alleges that Fannie Mae and its top executives — Franklin
D. Raines, J. Timothy Howard and Leanne G. Spencer — artificially inflated
the company’s publicly traded common stock through false public financial
statements. “Because these executives were compensated primarily on Fannie
Mae’s stock performance, this artificially high stock price allowed the
executives to get rich at the expense of the company’s shareholders,” Petro
said.
In violation of The Securities Exchange Act and Securities and Exchange
Commission rules, Fannie Mae and its officers did not disclose that the
company:
– failed to apply generally accepted accounting procedures;
– lacked sufficient internal auditing controls;
– failed to report the volatility of the company’s earnings.
The federal agency charged with overseeing Fannie Mae stated its findings
were not simply differences in interpretation of accounting principles.
Rather, the findings demonstrated “clear instances in which management sought
to misapply and ignore accounting principles for the purposes of meeting
investment analyst expectations; reducing volatility in reporting earnings;
and enabling fragmented processes and systems and an ineffective controls
environment to exist.”
