Posted by Jack Lee
NEW YORK (Reuters)Four former top executives of Fannie Mae were sued on Monday, one day after the mortgage finance giant was seized by the U.S. government, in an investor lawsuit that claims the four lied about the company’s financial position and artificially inflated its share price.
The lawsuit, filed in U.S. District Court for the Southern District of New York, seeks class action status for investors who bought Fannie Mae securities between Nov. 16, 2007, and Sept. 5, 2008, according to the complaint, filed by the law firm of Coughlin Stoia Geller Rudman & Robbins.
Named as defendants are: Stephen Ashley, chairman; Daniel Mudd, president and chief executive officer; Stephen Swad, chief financial officer; and Robert Levin, chief business officer of Fannie Mae.
Messrs. Ashley, Mudd and Levin were replaced on Sunday under the governments takeover plan. Mr. Swad had been replaced as CFO on Aug. 28.
According to the complaint, Mr. Mudd received more than $14 million in compensation from Fannie Mae in 2006 and more than $12 million in 2007; Mr. Levin received more than $9.5 million in 2006 and more than $8.4 million in 2007; Mr. Swad received more than $4.8 million in 2007; and Mr. Ashley received more than $500,000 in 2007.
Because of their positions within the company and their access to material non-public information available to them but not to the public, the individual defendants knew that the adverse facts specified herein had not been disclosed to and were being concealed from the public and that the positive representations being made were then materially false and misleading, according to the complaint.
The complaint details statements by the company in the fall of 2007 and spring of 2008 about its financial position and the capital raises Fannie Mae undertook.
The four are accused of: making false statements; failing to disclose adverse facts known to them about Fannie Mae; deceiving investors about Fannie Maes prospects and business; artificially inflating the prices of Fannie Maes publicly traded securities; and causing the plaintiff and other investors to purchase securities at inflated prices.