Reuters: Regulatory News: UPDATE 1-Ex-Fannie Mae execs lose bid to end SEC fraud lawsuit

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UPDATE 1-Ex-Fannie Mae execs lose bid to end SEC fraud lawsuit Aug 10th 2012, 19:39 Fri Aug 10, 2012 3:39pm EDT * Ex-CEO Mudd accused of misleading mortgage disclosures * Judge says SEC plausibly alleged intent to mislead * Lawyers for defendants not immediately available Aug 10 (Reuters) - Three former senior Fannie Mae executives lost their bid to win dismissal of a U.S. Securities and Exchange Commission fraud lawsuit accusing them of misleading investors about the company's exposure to risky mortgages. The executives, including one-time Chief Executive Daniel Mudd, contended that Fannie Mae had explicitly and accurately disclosed its exposure to subprime and so-called "Alt-A" home loans before the government seized the mortgage-finance enterprise in September 2008. But U.S. District Judge Paul Crotty in Manhattan on Friday said the SEC has plausibly alleged that the defendants knew the company's disclosures were materially misleading, and that some of their conduct constituted "an extreme departure from the standard of ordinary care." The SEC had sued Mudd, former Chief Risk Officer Enrico Dallavecchia and former Executive Vice President Thomas Lund on Dec. 16 after a three-year probe. James Wareham, a lawyer for Mudd; Andrew Levander, a lawyer for Dallavecchia; and Michael Levy, a lawyer for Lund, were not immediately available for comment. SEC spokesman Kevin Callahan said: "We are pleased that the judge rejected the defendants' arguments and we look forward to proving our claims in court." U.S. regulators seized Fannie Mae and the smaller Freddie Mac on Sept. 7, 2008 and put them into a conservatorship. Mudd ran Fannie Mae from 2005 until the seizure. On the same day it filed the Fannie Mae lawsuit, the SEC filed a similar lawsuit against three former Freddie Mac officials, including Richard Syron, who had been chief executive. Those defendants want that case dismissed. The Fannie Mae case is SEC v. Mudd et al, U.S. District Court, Southern District of New York, No. 11-09202. The Freddie Mac case is SEC v. Syron et al in the same court, No. 11-09201. Link this Share this Digg this Email Reprints

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