(WASHINGTON, D.C.) — Ohio Attorney General Mike DeWine testified today before the Oversight and Investigations Subcommittee of the House Financial Services Committee regarding the astronomical amount of U.S. taxpayer dollars going to pay for attorney fees to defend Fannie Mae and its former executives. At least $132 million has been spent by taxpayers on legal fees in the case so far, and the tab keeps rising.
In a class-action lawsuit, DeWine represents the lead plaintiff — the Ohio Public Employees Retirement System and the State Teachers Retirement System, representing 1 million Ohio public employees and teachers — and nearly 29 million other investors from all 50 states who have been defrauded by Fannie Mae. The suit was filed over six years ago and has not gone to trial or been settled.
“Simply put, Fannie Mae and its former executives have been using American taxpayer dollars to pay their highly compensated cadre of lawyers to over-lawyer their indefensible actions. It is wrong, it is unconscionable and I urge the committee and Congress to bring it to an end,” DeWine said.
The class-action lawsuit filed on behalf of Ohio’s public pension funds in 2004 is against Fannie Mae; its three most senior officers, Franklin Raines, Tim Howard and Leanne Spencer; and its accountant, KMPG. Typically, 98 percent of all securities fraud cases are resolved in far less time.
“Fannie Mae and the executives whom it is indemnifying are using taxpayer resources to lawyer this case to death and delaying justice for those whom they defrauded in the first place more than six years ago, while simultaneously swindling every American taxpayer,” DeWine added. “We don’t question the need for Fannie Mae and its executives to defend themselves. However, we do question the over-lawyering that is sticking American taxpayers with the bill.”
DeWine gave the example of the deposition of Franklin Raines from April 2010. The plaintiffs were the only party asking questions. The Fannie Mae defendants brought 13 lawyers — none of whom asked a single question. They just sat there and billed the taxpayers for their hours.
DeWine also told the committee that when the judge has conferences to check on the status of the litigation, the plaintiffs typically bring three lawyers and the Fannie Mae defendants typically bring 35 to 40 attorneys and paralegals, costing taxpayers more than $600 per hour for some of the lawyers.
“This is bigger than Enron. It is bigger than Worldcom. It has turned into a feeding frenzy on the part of Fannie Mae and its former officers. The evidence is overwhelming, and it is time to rein them in. Enough is enough,” DeWine concluded.
To read the Attorney General’s remarks as prepared, visit www.OhioAttorneyGeneral.gov/FannieMaeTestimony.
Lisa Hackley: 614-644-0508
Eve Mueller: 614-728-5432