Two Massachusetts pension funds have been leading a class action lawsuit against Fannie Mae, accusing the firm of securities fraud that caused shareholders to lose money.
On Monday the pension funds, the Pension Reserves Investment Trust and the Boston Retirement Board, said they had reached a $170 million settlement with Fannie Mae.
From the Boston Globe:
The Massachusetts state pension fund announced Monday a proposed $170 million settlement in a class-action lawsuit brought in 2008 against the Federal National Mortgage Association, known as Fannie Mae.
The state fund, called the Pension Reserves Investment Trust, was co-lead plaintiff in the lawsuit, with the Boston Retirement Board. It’s not yet clear how much the state and Boston funds will receive from the proposed settlement, which includes thousands of stockholders.
“We are proud to have helped negotiate a meaningful recovery for Fannie Mae investors by stepping forward in this case,” Michael Trotsky, executive director of the $60.7 billion state fund, said in a statement. “Pursuing meritorious litigation where we believe we can add value” is part of the fund’s overall strategy, he said.
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The lawsuit was filed in federal court in the Southern District of New York and alleged that shareholders lost money due to securities fraud by Fannie Mae and two of its former officers between Nov. 8, 2006, and Sept. 5, 2008.
Specifically, the lawsuit alleged that the defendants made false and misleading statements concerning the company’s internal controls and its exposure to subprime and other risky mortgage loan products.
A separate lawsuit brought previously by other plaintiffs against Freddie Mac had failed.
The proposed settlement must be approved by the court. If approved, a court-appointed administrator would oversee the claims and the divvying up of the recovered money.
The Boston Retirement Board manages $4 billion in assets. The Pension Reserves Investment Trust manages $53 billion in assets.
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