Fannie Mae Sued in Class Action Lawsuit

Marketwatch reports:

Patton Roberts, PLLC ( www.pattonroberts.com), a national law firm with offices in Little Rock, Arkansas, Texarkana, Texas, and Shreveport, Louisiana announces that it filed, on October 8, 2008, a class action lawsuit against Fannie Mae on behalf of purchasers of Fannie Mae's 8.25% Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series S who purchased the stock between December 11, 2007 and September 5, 2008, inclusive (the "Class Period"). Fannie Mae is the nation's largest source of financing for home mortgages. The action was filed in the United States District Court for Southern District of New York (08-CIV-8609).
In the complaint, plaintiffs allege that the defendants -- including several former officers and directors of Fannie Mae and the underwriters responsible for the Series S preferred stock offering -- knew or recklessly disregarded that Fannie Mae was grossly undercapitalized, in violation of Federal regulations, because of its overwhelming investments in subprime and Alt-A mortgages. These assets were not properly accounted for in violation of Generally Accepted Accounting Principles (GAAP). Fannie Mae's capital deficiency also was concealed because its deferred tax assets and guaranty obligations were not properly accounted for in violation of GAAP.

Couldn't happen to a nicer bunch.