Leanne Spencer, a former senior vice president and controller at Fannie Mae (FNMA), was dropped from a shareholders’ securities fraud suit over claims she helped hide a $6.3 billion overstatement of earnings from 2001 to 2004.
U.S. District Judge Richard Leon in Washington ruled today that the investors failed to show Spencer was told that Fannie Mae committed fraud or violated accounting standards before signing off on the company’s financial statements.
Spencer is the third ex-Fannie Mae official to be dismissed from the case. Leon earlier dropped former Chairman Franklin Raines and former Chief Financial Officer J. Timothy Howard.
“Plaintiffs, as they did with Raines and Howard, have stitched together a patchwork quilt of evidence that they allege demonstrates Spencer’s intent to deceive Fannie Mae’s investors,” Leon said in a 30-page ruling. “I disagree.”
The Ohio Public Employees Retirement System and the State Teachers Retirement System of Ohio in 2004 sued Fannie Mae, the former executives and Fannie’s auditor, KPMG. U.S. investigators in 2006 accused Howard and other executives of overstating profit from 2001 to June 2004 to meet targets and trigger bonuses.
Leon’s ruling vindicates Spencer and ends her “eight-year nightmare,” David Krakoff, a lawyer for Spencer, said in an e- mailed statement.
“The court ruled that the plaintiffs were entitled to nothing because there was no proof that Ms. Spencer had manipulated earnings or violated federal securities laws,” Krakoff said.
Dan Tierney, a spokesman for Ohio Attorney General Mike DeWine, didn’t immediately respond to a telephone message seeking comment.
The case is In Re Fannie Mae Securities Litigation, 1:04- cv-01639, U.S. District Court, District of Columbia (Washington).
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