Settlement of Fannie Mae Stock Suit Gets Preliminary Approval

A federal court judge has given preliminary approval to a $7.25-million settlement of an Employee Retirement Income Security Act (ERISA) action against the Federal National Mortgage Association (Fannie Mae).

The settlement covers a class of all current and former participants and beneficiaries of Fannie Mae’s Employee Stock Ownership Plan (ESOP) whose individual accounts included investments in Federal National Mortgage Association stock at any time from January 1, 2001, to December 6, 2006. A hearing in the U.S. District Court for the District of Columbia for final approval is set for July 20, according to the court opinion. 

The lawsuit claimed fiduciaries of the ESOP breached their fiduciary duties by continuing to offer company stock as an investment when it was no longer prudent and by failing to convey the true financial condition of the company and riskiness of its stock. 

The case is In re Federal National Mortgage Ass’n Securities, Derivative and “ERISA” Litigation, D.D.C., No. 1:04-cv-01784.