“Mudd and Dallavecchia spoke to investors on conference calls and repeated (Fannie’s) misleading disclosures while emphasizing that (Fannie’s) subprime exposure was ‘immaterial,’ and constituted approximately ‘zero percent’ of (Fannie’s) book of business.”
Former Fannie execs denied dismissal of subprime fraud suit
Three former executives at Fannie Mae lost their bid to end a Securities and Exchange Commission lawsuit alleging investor fraud.
The SEC filed suit against former CEO Daniel Mudd, former Chief Risk Officer Enrico Dallavecchia and the former chief of the single-family operation Thomas Lund for misleading investors about the entity’s exposure to risky subprime mortgages. Each served at the firm between 2005 and 2009.
When Mudd took over in 2005, Fannie stock traded above $60 a share. By September 2008, when he left, the company was thrown into conservatorship and has taken more than $116 billion in bailouts since. Taxpayers are also funding attorney fees in several suits against former government-sponsored enterprise executives.
The SEC alleged in a December 2011 lawsuit these three executives excluded nearly $100 billion in loans written to borrowers with weak credit histories from their financial disclosures. The GSE also allegedly failed to count $28.5 billion in mortgages bought from the Countrywide subprime unit in 2007.