Case 1:04-cv-01639-RJL Document 885 Filed 11/24/10 Page 1 of 7

UNITED STATES DISTRICT COURT DISTRICT OF COLUMBIA ) MDL No. 1668 ) Consolidated Civil Action No. 1:04-CV-01639 ) Judge Richard J. Leon

In Re Fannie Mae Securities Litigation

LEAD PLAINTIFFS SUPPLEMENTAL MEMORANDUM IN SUPPORT OF ITS MOTION TO LIMIT FANNIE MAE DEFENDANTS EXPERT WITNESSES Lead Plaintiffs respectfully submit this memorandum to update the Court on the Fannie Mae Defendants1 experts. Although Fannie Mae is indemnifying Defendants Raines, Howard and Spencer in this 2004 securities fraud class action (paying all of their attorneys fees, expert fees and other costs) and the Fannie Mae Defendants have alleged nearly identical affirmative defenses, these defendants collectively initially designated an unprecedented 29 expert witnesses. In contrast, Defendant KPMG reasonably designated 5 experts. Lead Plaintiffs, who have the burden of proof, designated a total of 9 experts and submitted the reports of 8 of their experts2 on September 15, 2010, significantly narrowing the issues to be covered by experts as requested by Defendants. On November 15, 2010, the Fannie Mae Defendants amended their expert designations and provided written reports for a total of 25 experts,3 reducing their experts only by 4. So, along with KPMG, the Defendants have now designated a total of 30 experts (costing an estimated $12 to $15 million dollars, exclusive of defense counsel fees), as follows: Number of Experts 9 7 5 5 4
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Defendant Raines Fannie Mae Howard KPMG Spencer

Fannie Mae Defendants include Defendant Fannie Mae and its three former senior officers, Defendants Franklin Raines, Timothy Howard, and Leanne Spencer. 2 Lead Plaintiffs designated 1 rebuttal expert who, if used, is required to submit a report on Dec. 20, 2010. 3 Defendants Spencer and Howard have each now designated an expert initially designated by Fannie Mae.

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Lead Plaintiffs appreciate the elimination of 4 experts by the Fannie Mae Defendants. However, many of the 30 expert reports submitted by Defendants cover the same facts and contain substantially identical opinions that will inevitably result in cumulative and duplicative testimony. Allowing the depositions and testimony of experts who have provided redundant and cumulative testimony to go forward would frustrate the intent of Fed. R. Civ. P. 1, which provides that the class is entitled to the just, speedy, and cost effective determination of their action. Moreover, the testimony of these duplicative experts should be excluded as violative of Fed. R. Evid. 403 and case law because it would result in undue delay, waste of substantial time, expense and resources, and needless presentation of duplicative and cumulative evidence. The general topics and the number of defense experts covering each topic are as follows: Fannie Mae General Topic Defendants Experts KPMG Experts Damages/Valuation of public companies 4 1 Internal Controls 4 FAS 133 and derivatives 3 2 FAS 91 2 1 GAAP/Other Accounting Issues/SEC 5 Governance/Role of Officers/Disclosures 3 (all 3 by Defendant Raines) Compensation 2 (both by Defendant Raines) GAAS (auditing standards) 1 1 OFHEO Oversight 1 It is clear on the face of these reports that the damages, FAS 133, internal controls, compensation, and governance reports provide redundant, duplicative and cumulative testimony. For example, while Lead Plaintiffs designated one compensation and governance expert, Defendant Raines submitted 2 reports on compensation, both of which describe Fannie Maes compensation plans in detail.4 Putting aside the facts that Fannie Maes compensation programs

Copies of the reports of Defendant Raines compensation experts Pearl Meyer and Wayne Guay are attached hereto as Exhibits 1 and 2, respectfully (filed under seal because they were marked highly confidential).

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and the compensation of executives were publicly disclosed during the class period, can easily be explained through fact witnesses familiar with those programs, and these defense experts do not have any scientific, technical, or other specialized knowledge that will assist the trier of fact to understand the evidence or to determine a fact in issue as required by Fed. R. Evid. 702, it is undoubtedly wasteful and unnecessary to have 2 experts explain the same Fannie Mae compensation programs to a jury. Defendant Raines also submitted 3 reports on corporate governance and the roles of the Board and the chief executive officer.5 All three reports are submitted for the same basic premise that Defendant Raines acted appropriately in his role as CEO and was entitled to rely on others and any of the three experts could have easily covered all of the topics in the three reports based upon their asserted qualifications. Similarly, the Fannie Mae Defendants 4 damage expert reports are substantially cumulative and duplicate. Indeed, the damage reports of Andrew Carron (Howard expert) and Christopher James (Fannie Mae expert) are nearly identical, discussing the same information and reaching the same conclusions; moreover, that same information and conclusions are also included in the report of yet another Fannie Mae damage expert Allan Kleidon - and in the two reports of KPMGs damage expert, Richard S. Ruback.6 Defendants FAS 133 and internal controls reports are similarly redundant and cumulative.7 The case law referenced in Lead Plaintiffs motion is clear that usually the testimony of one competent witness on each side is enough to insure a full and fair elucidation of what is

Copies of the reports of Defendant Raines governance experts Robert Haft, Ronald Gilson and Edward J. Zajac are attached hereto as Exhibits 3, 4 and 5, respectively (filed under seal because marked confidential). 6 Copies of the damages reports of Andrew Carron, Christopher James, Allan Kleidon and Greg Kyle are attached hereto as Exhibits 6, 7, 8 and 9, respectively (filed under seal because marked confidential). 7 Copies of the reports of the Fannie Mae Defendants FAS 133 experts Esther Mills, L. Joe Moravy and Linda MacDonald are attached hereto as Exhibits 10, 11 and 12 respectively (filed under seal). Copies of the internal controls experts Hubert Glover, Vincent Love, Alfred Osborne and Patricia Woodbury are attached hereto as Exhibits 13, 14, 15 and 16, respectively (filed under seal because marked confidential).

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recondite in the case and that the voice of a single teacher is worth more than the confusion of many tongues. And, the expense of duplicative and redundant testimony is worse than useless. The Fannie Mae Defendants assured the Court they would not proceed with cumulative or redundant expert testimony, regardless of which party puts on that testimony, and that after production of Defendants expert reports, they would be able to assess whether any of their experts would indeed offer redundant opinions and would eliminate redundant opinions.8 It is now very clear after receiving all defense expert reports that several defense experts have offered redundant reports and opinions. If the redundant and duplicative experts are not promptly eliminated, Lead Plaintiffs will have to expend and waste substantial time and resources preparing rebuttal reports (which are due December 20 pursuant to Case Management Order No. 8) and deposing all 30 defense experts, when the Court has already indicated that such a large number of defense experts will not be permitted to testify at trial.9 The Fannie Mae Defendants continued unwillingness to voluntarily reduce the duplicative and redundant experts completely ignores the unfair burden such refusal places upon the Court and Lead Plaintiffs. Accordingly, Lead Plaintiffs respectfully request that the Court enter an order requiring, at a minimum, that the Fannie Mae Defendants submit to Lead Plaintiffs, on or before December 6, 2010, amended expert designations reducing their total number of experts by at least 11, as follows:

See Individual Defendants Opposition to Lead Plaintiffs Motion [Dkt. #882], pg. 1 (The Individual Defendants take seriously the Courts concerns about the number of experts and do not intend to proceed with cumulative or redundant expert testimony, regardless of which party puts on that testimony.); Fannie Maes Opposition to Lead Plaintiffs Motion [Dkt. 881], pg. 12 (Once the defendants submit their expert reports, Fannie Mae and the Individual Defendants will be better able to assess whether any of their experts would offer redundant opinions and would commit at that time to re-evaluating whether there are additional expert witnesses who can be eliminated.). 9 Lead Plaintiffs estimate that it will cost at least $500,000 in expert time for the two-day depositions of the 30 defense experts this does not include the costs of all attorneys to prepare for and attend the depositions, travel costs and court reporter costs.

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1. Defendant Raines must withdraw the designation and report of 1 of his 2 compensation experts. If desired, Defendant Raines may submit, by December 9, 2010, an amended report by his one remaining compensation expert. 2. Defendant Raines must withdraw the designations and reports of 2 of his 3 experts who testified with respect to governance and the role of officers (Zajac, Gilson and Haft). If desired, Defendant Raines may submit, by December 9, 2010, an amended report by his one remaining expert on governance and the role of officers. 3. The Fannie Mae Defendants must withdraw the designations and reports of 2 of their 3 experts on FAS 133 and designate which one report submitted on November 15, 2010, they will use to jointly cover FAS 133 issues. 4. The Fannie Mae Defendants must withdraw the designations and reports of 3 of their 4 internal control experts (Glover, Love, Osborne and Woodbury) and designate which one report submitted on November 15, 2010, that they will use to jointly cover internal control issues. 5. The Fannie Mae Defendants must withdraw the designations and reports of 3 of their 4 damages experts (Kleidon, James, Kyle, and Carron) and designate which one report submitted on November 15, 2010, that they will use to jointly cover damage issues. Pursuant to Rule 26(b)(4)(E), to avoid the manifest injustice that would result from Lead Plaintiffs having to pay the unreasonable and unprecedented number of defense experts for their time during their two-day depositions,10 Lead Plaintiffs respectfully request that the Court order

10

The hourly rates the Defendants agreed to pay their experts range from $300 per hour to $1,500 per hour, with 20 experts being paid at $600 per hour or more.

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the Defendants to pay the fees of their own 30 experts for their attendance at their depositions and Lead Plaintiffs will pay the fees of their 9 experts for their attendance at their depositions. Respectfully submitted, ATTORNEY GENERAL FOR THE STATE OF OHIO RICHARD CORDRAY WAITE, SCHNEIDER, BAYLESS & CHESLEY CO., L.P.A. s/ Stanley M. Chesley Stanley M. Chesley s/ James R. Cummins James R. Cummins (D.C. Bar #OH0010) Melanie S. Corwin Christopher D. Stock 1513 Fourth & Vine Tower One West Fourth Street Cincinnati, Ohio 45202 Telephone: (513) 621-0267 Facsimile: (513) 621-0262 E-mail: jcummins@wsbclaw.com Special Counsel for the Attorney General of Ohio and Lead Counsel for Lead Plaintiffs BERNSTEIN LIEBHARD LLP Jeffrey Lerner 10 East 40th Street New York, New York 10016 Telephone: (212) 779-1414 Facsimile: (202) 298-7678 E-mail: lerner@bernlieb.com Special Counsel for the Attorney General of Ohio and Co-Lead Counsel for Lead Plaintiffs COHEN MILSTEIN SELLERS & TOLL PLLC s/ Daniel S. Sommers Daniel S. Sommers (DC Bar #416549) Matthew K. Handley (DC Bar #489946) 1100 New York Avenue, N.W. Washington, D.C. 20005 Telephone: (202) 408-4600 Facsimile: (202) 408-4699 E-mail: dsommers@cohenmilstein.com Local Counsel for Lead Plaintiffs

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CERTIFICATE OF SERVICE I certify that on November 24, 2010 (i) I electronically filed the foregoing with the Clerk of Court using the CM/ECF system, which will send notification of such filing to counsel of record in this matter who are registered on the CM/ECF, and (ii) service was accomplished on any counsel of record not registered through the CM/ECF system via regular U.S. mail. All exhibits to this Memorandum have been filed under seal and served on counsel of record via email. s/ Daniel S. Sommers Daniel S. Sommers (DC Bar #416549)

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