In re Fannie Mae Securities Litigation

District of Columbia, dcd-1:2004-cv-01639

MOTION to Certify Class by OHIO PUBLIC EMPLOYEES RETIREMENT SYSTEM, STATE TEACHERS RETIREMENT SYSTEM OF OHIO. Associated Cases: 1:04-cv-01639-RJL,1:04-cv-01783-RJL,1:04-cv-01843-RJL,1:05-cv-00620-RJL,1:05-cv-01198-RJL, 1:06-cv-00082-RJL,1:06-cv-00139-RJL

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3 UNITED STATES DISTRICT COURT DISTRICT OF COLUMBIA)) In re Federal National Mortgage Association) MDL No. 1688 Securities, Derivative, and "ERISA" Litigation)))) In re Fannie Mae Securities Litigation) Consolidated Civil Action.) No. 1:04-cv-1639 (RLJ)) LEAD PLAINTIFFS' MOTION FOR CLASS CERTIFICATION Pursuant to Rules 23(a) and 23(b)(3) of the Federal Rules of Civil Procedure, lead plaintiffs Ohio Public Employees Retirement System ("OPERS") and State Teachers Retirement System of Ohio ("STRS") ("Lead Plaintiffs"), move this Court for an order certifying this action as a class action and designating Lead Plaintiffs as the representatives of a plaintiff class (the "Class") defined as follows: All purchasers of the publicly traded common stock and call options of Federal National Mortgage Association ("Fannie Mae"), and sellers of Fannie Mae publicly traded put options during the period from April 17, 2001, through September 27, 2005 (the "Class Period") who suffered damages thereby. Excluded from the Class are: (i) the Defendants, (ii) any person who was an officer or director of Fannie Mae or any of its parents or subsidiaries during the Class Period, (iii) the members of the immediate family of each of the Individual Defendants, (iv) any entity in which any Defendant had a controlling interest during the Class Period, (v) any parent or subsidiary of Fannie Mae, (vi) any incentive, retirement, stock or other benefit plan that benefited solely the Individual Defendants; and (vii) the legal representatives, heirs, predecessors, successors or assigns of any of the foregoing excluded persons and entities. 3 Lead Plaintiffs further move this court for an Order appointing Waite, Schneider, Bayless & Chesley Co., L.P.A. as Lead Class Counsel and Berman DeValerio Pease Tabacco Burt & Pucillo as Co-Lead Class Counsel. Lead Plaintiffs make this motion based upon the Second Consolidated Class Action Complaint for Violations of Federal Securities Laws, the Memorandum of Law submitted contemporaneously herewith and on all other pleadings, motions and orders in this action. Lead Plaintiffs' [Proposed] Order is filed concurrently herewith. Dated: May 17, 2006 Respectfully submitted, ATTORNEY GENERAL OF OHIO JIM PETRO WAITE, SCHNEIDER, BAYLESS & CHESLEY CO., L.P.A. /s/ Stanley M. Chesley Stanley M. Chesley (Ohio Bar #0000852) James R. Cummins (DC Bar #0H0010) Melanie S. Corwin (Ohio Bar #0046513) 1513 Fourth & Vine Tower One West Fourth Street Cincinnati, Ohio 45202 Tel: 513/621-0267 Fax: 513/621-0262 E-mail: jcummins@wsbclaw.com Special Counsel for the Attorney General of Ohio and Lead Counsel for Lead Plaintiffs Ohio Public Employees Retirement System and State Teachers Retirement System of Ohio BERMAN DEVALERIO PEASE TABACCO BURT & PUCILLO /s/ Jeffrey C. Block Jeffrey C. Block (NY-JCB-0387) Kathleen M. Donovan-Maher Julie A. Richmond One Liberty Square 2 3 Boston, MA 02109 Tel: 617/542-8300 Fax: 617/542-1194 E-mail:jblock@bermanesq.com Co-Lead Counsel for Lead Plaintiffs Ohio Public Employees Retirement System and State Teachers Retirement System of Ohio COHEN, MILSTEIN, HAUSFELD & TOLL, P.L.L.C. /s/ Steven J. Toll. Steven J. Toll (DC Bar #225623) Daniel S. Sommers (DC Bar #416549) Matthew K. Handley (DC Bar #489946) 1100 New York Avenue, N.W. Washington, DC 20005 Tel: 202/408-4600 Fax: 202/408-4699 E-mail:stoll@cmht.com Local Counsel for Lead Plaintiffs Ohio Public Employees Retirement System and State Teachers Retirement System of Ohio OF COUNSEL: BARRETT & WEBER L.P.A. C. Francis Barrett Suite 500, 105 East Fourth Street Cincinnati, Ohio 45202 Tel: 513/721-2120 Fax: 513/721-2139 Special Counsel for the Attorney General of Ohio STATMAN, HARRIS, SIEGEL & EYRICH, LLC Alan J. Statman (0012045) Jeffrey P. Harris (0023006) 2900 Chemed Center 255 East Fifth Street Cincinnati, Ohio 45202 Tel: 513/621-2666 Fax: 513/587-4477 E-mail:ajstatman@shselegal.com E-mail:jharris@shselegal.com 3 3 UNITED STATES DISTRICT COURT DISTRICT OF COLUMBIA)) In re Federal National Mortgage Association) MDL No. 1688 Securities, Derivative, and "ERISA" Litigation)))) In re Fannie Mae Securities Litigation) Consolidated Civil Action.) No. 1:04-cv-1639 (RLJ)) MEMORANDUM OF LAW IN SUPPORT OF LEAD PLAINTIFFS' MOTION FOR CLASS CERTIFICATION 3 TABLE OF CONTENTS Page TABLE OF AUTHORITIES ......................................................................................................i-vii I. INTRODUCTION .................................................................................................................. 1 II. STATEMENT OF FACTS ..................................................................................................... 2 III. ARGUMENT .......................................................................................................................... 6 A. The Standards Of Fed. R. Civ. P. 23(a) Have Been Met ............................................ 6 1. The Numerosity Requirement Is Satisfied ...................................................... 9 2. There Are Questions Of Law And Fact Common To The Class ................... 10 3. Lead Plaintiffs' Claims Are Typical Of Those Of The Members Of The Class ........................................................................... 12 4. Lead Plaintiffs Will Fairly And Adequately Protect The Interests Of The Class ................................................................ 20 B. The Requirements Of Rule 23(b)(3) Are Satisfied .................................................... 23 1. Common Questions Of Law And Fact Predominate ...................................... 23 2. A Class Action Is Superior To Other Available Methods For The Fair And Efficient Adjudication Of This Action .............................. 28 IV. CONCLUSION ....................................................................................................................... 29 3 TABLE OF AUTHORITIES FEDERAL CASES Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997).......................................................................................................9, 24 Arnett v. American Nat'l Red Cross, 78 F.R.D. 73 (D.D.C. 1978).....................................................................................................21 Ballard v. Blue Shield of S.W. Va., Inc., 543 F.2d 1075 (4th Cir. 1976), cert. denied, 430 U.S. 922 (1977)............................................9 In re Bally Mfg. Sec. Corp. Litig., 141 F.R.D. 262 (N.D. Ill. 1992)...............................................................................................18 Basic Inc. v. Levinson, 485 U.S. 224 (1988).......................................................................................................7, 15, 16 Blackie v. Barrack, 524 F.2d 891 (9th Cir. 1975) ........................................................................................... passim In re Blech Sec. Litig., 187 F.R.D. 97 (S.D.N.Y. 1999) ...........................................................................................8, 11 Committee of Blind Vendors v. District of Columbia, 695 F. Supp. 1234 (D.D.C. 1988) ............................................................................................10 Covelo Indian Cmty. v. Watt, 551 F. Supp. 366 (D.D.C. 1982) ........................................................................................13, 21 In re Data Access Systems Sec. Litig., 103 F.R.D. 130 (D.N.J. 1984)..................................................................................................17 DeLoach v. Philip Morris Cos., 206 F.R.D. 551 (M.D.N.C. 2002) ............................................................................................25 Deutschman v. Beneficial Corp., 132 F.R.D. 359 (D. Del. 1990) ................................................................................................19 In re Drexel Burnham Lambert Group, 960 F.2d 285 (2nd Cir. 1992)...................................................................................................14 Dunnigan v. Metropolitan Life Ins. Co., 214 F.R.D. 125 (S.D.N.Y. 2003) .............................................................................................12 i 3 Dura-Bilt Corp. v. Chase Manhattan Corp., 89 F.R.D. 87 (S.D.N.Y. 1981) .................................................................................................24 Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974).......................................................................................................8, 15, 16 Eisenberg v. Gagnon, 766 F.2d 770 (3rd Cir. 1985) .........................................................................................8, 19, 21 In re Enron Corp. Sec. Litig., 206 F.R.D. 427 (S.D. Tex. 2002).............................................................................................19 Fine v. American Solar King Corp., 919 F.2d 290 (5th Cir. 1990) ...................................................................................................16 Foltz v. U.S. News & World Report, Inc., 111 F.R.D. 49 (D.D.C. 1986).....................................................................................................7 Forbush v. J.C. Penney Co., 994 F.2d 1101 (5th Cir. 1993) .................................................................................................13 Freeland v. Iridium World Communications, Ltd., 233 F.R.D. 40 (D.D.C. 2006).................................................................................................7, 8 Ganesh, L.L.C. v. Computer Learning Ctrs., Inc., 183 F.R.D. 487 (E.D. Va. 1998) ....................................................................................9, 14, 20 Gary Plastic Packing Corp. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 903 F.2d 176 (2d Cir. 1990)................................................................................................... 7-8 General Tel. Co. of the Southwest v. Falcon, 457 U.S. 147 (1982).................................................................................................................13 Gilbert v. First Alert, Inc., 165 F.R.D. 81 (N.D. Ill. 1996).................................................................................................18 Gilbert v. First Alert Inc., 904 F. Supp. 714 (N.D. Ill. 1995) ............................................................................................15 In re Gulf Oil/Cities Serv. Tender Offer Litig., 112 F.R.D. 383 (S.D.N.Y. 1986) .............................................................................................16 Hanon v. Dataproducts Corp., 976 F.2d 497 (9th Cir. 1992) ...................................................................................................16 ii 3 Hochschuler v. G.D. Searle & Co., 82 F.R.D. 339 (N.D. Ill. 1978)...........................................................................................19, 20 In re IGI Sec. Litig., 122 F.R.D. 451 (D.N.J. 1988)..................................................................................................14 In re Indep. Energy Holdings, PLC Sec. Litig., 210 F.R.D. 476 (S.D.N.Y. 2002) ...............................................................................8, 9, 24, 25 In re Initial Pub. Offering Sec. Litig., 227 F.R.D. 65 (S.D.N.Y. 2004) ...........................................................................................9, 20 Jarvaise v. Rand Corp., 212 F.R.D. 1 (D.D.C. 2002).....................................................................................................28 Kalodner v. Michaels Stores, Inc., 172 F.R.D. 200 (N.D. Tex. 1997) ............................................................................................16 Kennedy v. Tallant, 710 F.2d 711 (11th Cir. 1983) .................................................................................................27 King v. Kansas City S. Indus., Inc., 519 F.2d 20 (7th Cir. 1975) .......................................................................................................7 Kirby v. Cullinet Software, Inc., 116 F.R.D. 303 (D. Mass. 1987)........................................................................................16, 20 In re Kirschner Medical Corp. Sec. Litig., 139 F.R.D. 74 (D. Md. 1991)........................................................................................... passim Lewis v. Capital Mortg. Invs., 78 F.R.D. 295 (D. Md. 1977)...................................................................................................11 Lewis v. National Football League, 146 F.R.D. 5 (D.D.C. 1992).....................................................................................................21 Lightbourn v. County of El Paso, 118 F.3d 421 (5th Cir. 1997), cert. denied, 522 U.S. 1052 (1998)..........................................11 In re Lorazepam & Clorazepate Antitrust Litig., 202 F.R.D. 12 (D.D.C. 2001)........................................................................................... passim Malone v. Microdyne Corp., 148 F.R.D. 153 (E.D. Va. 1993) ............................................................................................ 8-9 iii 3 McCarthy v. Kleindienst, 741 F.2d 1406 (D.C. Cir. 1984) ...............................................................................................10 In re Medical Corp. Sec. Litigation, 139 F.R.D. 74 (D. Md, 1991) ...................................... passim Meredith v. Mid-Atlantic Coca Cola Bottling Co., 129 F.R.D. 130 (E.D. Va. 1989) ..............................................................................................14 Moskowitz v. Lopp, 128 F.R.D. 624 (E.D. Pa. 1989).........................................................................................17, 20 In re NASDAQ Market-Makers Antitrust Litig., 169 F.R.D. 493 (S.D.N.Y. 1996) .......................................................................................21, 25 National Constructors Ass'n v. National Elec. Contractors Ass'n, 498 F. Supp. 510 (D. Md. 1980), modified 678 F.2d 492 (4th Cir. 1982)......................... 13-14 In re Newbridge Networks Sec. Litig., 926 F. Supp. 1163 (D.D.C. 1996) ........................................................................................7, 11 Nicholas v. Poughkeepsie Sav. Bank [1990-1991 Transfer Binder], Fed. Sec. L. Rep. (CCH) ¶ 95,606 (S.D.N.Y. Sept. 26, 1990) ................................................18 In re Oxford Health Plans, Inc. Sec. Litig., 191 F.R.D. 369 (S.D.N.Y. 2000) .............................................................................................25 In re Oxford Health Plans, Inc. Sec. Litig., 199 F.R.D. 119 (S.D.N.Y. 2001) ....................................................................................... 19-20 Pigford v. Glickman, 182 F.R.D. 341 (D.D.C. 1998)..................................................................................... 10-11, 13 Robbins v. Moore Med. Corp., 788 F. Supp. 179 (S.D.N.Y. 1992)...........................................................................................21 Scholes v. Stone, McGuire & Benjamin, 143 F.R.D. 181 (N.D. Ill. 1992)...............................................................................................20 Schur v. Friedman & Shaftan, P.C., 123 F.R.D. 611 (N.D. Cal. 1988).............................................................................................19 Seidman v. American Mobile Sys., 157 F.R.D. 354 (E.D. Pa. 1994)...............................................................................................15 iv 3 In re Sepracor, Inc. Sec. Litig., 233 F.R.D. 52 (D. Mass. 2005).......................................................................................... 18-19 Shipes v. Trinity Indus., 987 F.2d 311 (5th Cir. 1993) ...................................................................................................13 Simpson v. Specialty Retail Concepts, Inc., 149 F.R.D. 94 (M.D.N.C. 1993) ........................................................................................13, 20 In re Southeast Hotel Props. Ltd. P'ship Investor Litig., 151 F.R.D. 597 (W.D.N.C. 1993)......................................................................................10, 13 Steiner v. Equimark Corp., 96 F.R.D. 603 (W.D. Pa. 1983) ...............................................................................................27 Stewart v. Rubin, 948 F. Supp. 1077 (D.D.C. 1996), aff'd, 124 F.3d 1309 (D.C. Cir. 1997) ..............................10 In re Storage Tech. Corp. Sec. Litig., 113 F.R.D. 113 (D. Colo. 1986) ..............................................................................................28 In re Sumitomo Copper Litig., 194 F.R.D. 480 (S.D.N.Y. 2000) .............................................................................................14 Switzenbaum v. Orbital Scis. Corp., 187 F.R.D. 246 (E.D. Va. 1999) ..............................................................................................25 Thomas v. Albright, 139 F.3d 227 (D.C. Cir. 1998) .................................................................................................14 Tolan v. Computervision Corp., 696 F. Supp. 771 (D. Mass. 1988) ...........................................................................................16 United States v. Trucking Employers, Inc., 75 F.R.D. 682 (D.D.C. 1977)...................................................................................................14 In re Vitamins Antitrust Litig., 209 F.R.D. 251 (D.D.C. 2002)......................................................................................... passim In re Warfarin Sodium Antitrust Litig., 212 F.R.D. 231 (D. Del. 2002) ................................................................................................26 In re Worldcom, Inc. Sec. Litig., 219 F.R.D. 267 (S.D.N.Y. 2003) .......................................................................................17, 25 v 3 Ziemack v. Centel Corp., 163 F.R.D. 530 (N.D. Ill. 1995)...............................................................................................18 DOCKETED CASES In re Global Crossing Ltd. Securities Litigation, Case No. 02-CV-910 (S.D.N.Y.) .....................22 Ohio Public Employees Retirement System and State Teachers Retirement System Of Ohio v. Freddie Mac, et al., Lead Case No. 03-CV-42612 (S.D.N.Y.)..............................22 UNREPORTED DECISIONS In re Arakis Energy Corp. Sec. Litig., No. 95-3431, 1999 U.S. Dist. LEXIS 22246 (E.D.N.Y. Apr. 27, 1999)...................................................................................................24, 28 In re Bank One Sec. Litig./First Chi. S'holder Claims, Case No. 00 CV 0767, 2002 U.S. Dist. LEXIS 8709 (N.D. Ill. May 9, 2002) ..............................................................................................................7 Barabin v. ARAMARK Corp., 210 F.R.D. 152 (E.D. Pa. 2002), aff'd, No. 02-8057, 2003 U.S. App. LEXIS 3532 (3d Cir. Jan. 24, 2003) .............................................................................................................26 In re Bearingpoint, Inc. Sec. Litig., 232 F.R.D. 534, 2006 U.S. Dist. LEXIS 1718 (E.D. Va. Jan. 17, 2006).............................................................................................................7 In re Electro-Catheter Sec. Litig., Civ. No. 87-41, 1987 U.S. Dist. LEXIS 13500 (D.N.J. Dec. 3, 1987) ...............................................................................................................17 Jones v. Ford Motor Credit Co., No. 00-8330, 2005 U.S. Dist. LEXIS 5381 (S.D.N.Y. Mar. 31, 2005) ....................................................................................................9, 22 Kolin v. American Plan Corp., No. CV-84-3183, 1986 U.S. Dist. LEXIS 27057 (E.D.N.Y. Apr. 8, 1986)...........................................................................................................18 RMED Int'l, Inc. v. Sloan's Supermarkets, Inc., No. 94 Civ. 5587 (PKL), 1996 U.S. Dist. LEXIS 3531 (S.D.N.Y. Mar. 25, 1996) ........................................................................................................25 vi 3 In re Saxon Sec. Litig., No. 82-Civ-3103, 1984 U.S. Dist. LEXIS 19223 (S.D.N.Y. Feb. 23, 1984) ...................................................................................................19, 26 Seidman v. Stauffer Chem. Corp., Civil No. B-84-543(TFGD), 1986 U.S. Dist. LEXIS 30264 (D. Conn. July 28, 1986)..........................................................................................................27 In re Technical Equities Federal Sec. Litig., No. C-86-20157(A)WAI, 1998 U.S. Dist. LEXIS 15813 (N.D. Cal. Oct. 3, 1989)..................................................................................................... 26-27 Yang v. Odom, No. 02-5968(JAP), 2005 U.S. Dist. LEXIS 18089 (D.N.J. Aug. 16, 2005).............................................................................................................18 OTHER AUTHORITIES 1 H. Newberg, Newberg on Class Actions § 4.29 at 332 (3d ed. 1992) ........................................31 Federal Rule of Civil Procedure 23 ....................................................................................... passim vii 3 Lead Plaintiffs, Ohio Public Employees Retirement System ("OPERS") and State Teachers Retirement System of Ohio ("STRS") (hereinafter collectively "Lead Plaintiffs"), by their counsel, respectfully submit this memorandum of law in support of their motion for class certification. I. INTRODUCTION This is a federal securities fraud action against Federal National Mortgage Association ("Fannie Mae" or the "Company") and Franklin D. Raines, former Chairman of the Board and Chief Executive Officer ("Raines"), Timothy Howard, former Vice Chairman of the Board and Chief Financial Officer ("Howard") and Leanne G. Spencer, former Vice President and Controller ("Spencer"). 1 Lead Plaintiffs' Amended Consolidated Class Action Complaint asserts that Defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the "Exchange Act"), and Rule 10b-5 promulgated thereunder, by issuing materially false and/or misleading public statements resulting in Fannie Mae's securities trading at artificially inflated prices. Pursuant to Rules 23(a) and 23(b)(3) of the Federal Rules of Civil Procedure, Lead Plaintiffs seek certification of a class consisting of the purchasers of Fannie Mae publicly traded common stock and call options and the sellers of Fannie Mae publicly traded put options during the period from April 17, 2001 (the day Fannie Mae issued a press release announcing financial results for the first quarter ending March 31, 2001) through September 27, 2005 (the day prior to Dow Jones reporting that "new and pervasive accounting violations" had been found at Fannie 1 Raines, Howard and Spencer are collectively referred to herein as the "Individual Defendants," and Fannie Mae and the Individual Defendants are collectively hereinafter referred to as "Defendants." 1 3 Mae, which caused Fannie Mae's stock price to fall 11% from $46.70 per share to $41.71 per share on September 28, 2005) (the "Class Period") (the "Class").2 Lead Plaintiffs also seek the appointment of OPERS and STRS as class representatives and the appointment of Waite, Schneider, Bayless & Chesley Co., L.P.A. as Lead Class Counsel and Berman DeValerio Pease Tabacco Burt & Pucillo as Co-Lead Class Counsel. This securities class action is ideally suited for class certification because: (i) the Class is so numerous that joinder of all members is impracticable, (ii) common issues of law and fact predominate, (iii) the claims or defenses of Lead Plaintiffs are typical of the Class, (iv) as demonstrated throughout the prosecution of this action to date, Lead Plaintiffs and their counsel will adequately represent and protect the interests of the Class, and (v) a class action is superior to any other available means for the fair and efficient adjudication of this controversy. As all of the requirements for class certification under Rule 23 of the Federal Rules of Civil Procedure are satisfied in this case, as described herein, Lead Plaintiffs' Motion for Class Certification should be granted. II. STATEMENT OF FACTS 3 Over a four-year period, Fannie Mae and the Individual Defendants orchestrated a scheme to minimize the Company's earnings volatility and report "smooth earnings" to 2 Excluded from the Class are: (i) the Defendants, (ii) any person who was an officer or director of Fannie Mae or any of its parents or subsidiaries during the Class Period, (iii) the members of the immediate family of each of the Individual Defendants, (iv) any entity in which any Defendant had a controlling interest during the Class Period, (v) any parent or subsidiary of Fannie Mae, (vi) any incentive, retirement, stock or other benefit plan that benefited solely the Individual Defendants; and (vii) the legal representatives, heirs, predecessors, successors or assigns of any of the foregoing excluded persons and entities. 3 The facts set forth herein are a general summary of the facts alleged in the Complaint. The allegations of the Complaint are presumed true for purposes of a motion for class certification. In re Lorazepam & Clorazepate Antitrust Litig., 202 F.R.D. 12, 14 (D.D.C. 2001). 2 3 investors. ¶¶ 4, 44, 49, 51, 53, 54, 82, 94, 96, 98, 104. 4 In a 198-page Report of Findings to Date issued by OFHEO on September 22, 2004 (the "OFHEO Report"), OFHEO uncovered a massive financial fraud, carried out by Defendants for one main purpose – to reduce the Company's earnings volatility and present Fannie Mae as a stable investment. ¶¶ 47, 51, 98, 116. The majority of Fannie Mae's fraud involved violations of Statement of Financial Accounting Standards ("SFAS") 91 ("Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases") and SFAS 133 ("Accounting for Derivative Instruments and Hedging Activities"). ¶ 51. With respect to SFAS 91, OFHEO concluded that management "intentionally developed accounting policies and selected and applied accounting methods to inappropriately reduce earnings volatility." ¶ 53. Similarly, OFHEO found that Fannie Mae specifically implemented SFAS 133 "in a manner that placed minimizing earnings volatility and maintaining simplicity of operations above compliance with GAAP." ¶ 54. The OFHEO Report also emphasized that Fannie Mae's accounting violations were not attributed to "mere differences in interpretation of accounting principles" nor were they limited occurrences, but were "pervasive" and "reinforced by management." ¶¶ 49, 51. This view was affirmed by the SEC's Chief Accountant, Donald Nicolaisen, who stated that Fannie Mae's failure to comply with SFAS 133 was "outside professional accounting standards" and was not "just a matter of interpretive judgment where two people could've come to varying conclusions." ¶ 66. 4 "¶__" refers to paragraph citations to the Second Amended Consolidated Class Action Complaint for Violations of Federal Securities Laws, dated April 17, 2006 (the "Complaint"). 3 3 That Fannie Mae intentionally manipulated its financial accounting in order to achieve the desired goal of smooth and steady earnings growth is not disputed, even by Fannie Mae. During his testimony at an October 6, 2004 hearing before the United States House of Representatives' Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, Defendant Howard admitted that he "made the judgment" that smoothing out some of the volatility SFAS 91 caused in quarterly earnings was necessary because, as he claimed, "it preserves the integrity and the quality of our published financial statements," despite his public certifications and statements that Fannie Mae's financials were accurate and prepared in accordance with GAAP. ¶ 104. The accounting manipulations at Fannie Mae were also specifically brought to the attention of Defendants Raines, Howard and Spencer during the Class Period by a former Manager of Financial Accounting, Deferred Assets in Fannie Mae's Controller Division, but they each ignored the warnings in order to continue to perpetrate the fraud. ¶¶ 12-13, 127-143. On September 27, 2004, Fannie Mae entered into an agreement with OFHEO to take steps to remedy its deficient internal controls, organization and staffing, governance, accounting and capital. ¶ 58. On October 12, 2004, Fannie Mae publicly disclosed that the U.S. Attorneys' Office for the District of Columbia was conducting a criminal investigation. ¶ 59. Seven days later, on October 19, 2004, Fannie Mae announced that the SEC had initiated a formal investigation of the Company. ¶ 60. On December 15, 2004, only two months after commencing their review, the SEC's Office of the Chief Accountant, whom Fannie Mae had deemed the final arbiter of its accounting compliance, confirmed OFHEO's findings by concluding that "Fannie Mae's accounting practices did not comply in material respects with the accounting requirements in Statement Nos. 4 3 91 and 133." ¶¶ 8, 63. The SEC ordered Fannie Mae to restate its publicly filed financial statements from 2001 through mid-2004, including totally eliminating the use of hedge accounting. ¶¶ 63, 64. Finally, on December 22, 2004, the Company reported that it would fully comply with the SEC's determination and restate its financial results from 2001 through mid-2004. ¶ 70. Fannie Mae estimated that the restatement would wipe out approximately $9 billion in previously reported earnings. Id. Soon after the SEC's determination that Fannie Mae's accounting policies and practices violated GAAP, Defendant Raines "retired," Defendant Howard "resigned," and Defendant Spencer "stepped down" from their respective positions with Fannie Mae. ¶¶ 68, 77. Fannie Mae's public accountants, KPMG LLP, were also discharged. ¶ 72. On December 23, 2004, OFHEO announced that it was reviewing Raines' and Howard's termination packages to determine whether "they were unjustly enriched," and Fannie Mae announced that its financial statements from 2001 to the present, including the third quarter of 2004, "should no longer be relied upon" as they did not comply with GAAP. ¶ 71. The violations noted in the OFHEO Report and those cited by the SEC were only the tip of the iceberg. On February 23, 2005, Fannie Mae announced that OFHEO identified additional violations of GAAP – citing GAAP violations in virtually every major accounting rule that applies to mortgage finance including SFAS 115, Accounting for Certain Investments in Debt and Equity Securities, SFAS 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, SFAS 65, Accounting for Certain Mortgage Banking Activities, and SFAS 149, Amendments of Statement 133 on Derivative Instruments and Hedging Activities. ¶¶ 79, 124. While the full financial impact of these violations have yet to be quantified by Fannie Mae, it was reported that Fannie Mae's violations of SFAS 149 alone, for 5 3 just one year, could cause Fannie Mae to decrease its earnings by nearly $2.76 billion, bringing Fannie Mae's total earnings restatement to approximately $12 billion. ¶ 80. Fannie Mae's accounting violations did not end there. On March 17, 2005, OFHEO disclosed that during its investigation it identified instances of Fannie Mae employees falsifying signatures on accounting ledgers and making changes in database records related to earnings without authorization. That same day Fannie Mae disclosed that it would not be filing its Form 10-K for the fiscal year ended December 31, 2004. On April 4, 2005, The Wall Street Journal reported that OFHEO was investigating whether Fannie Mae improperly accounted for trusts it set up to issue mortgage-backed securities. After the close of trading on April 9, 2005, Fannie Mae's current President and Chief Executive Officer, Daniel H. Mudd, disclosed that the Company's restatement would not be completed until the second half of 2006. The Company also disclosed that it was in violation of New York Stock Exchange rules requiring the filing of an annual financial report with the SEC, and thus was facing the possibility of delisting. On September 28, 2005, additional accounting violations at Fannie Mae were reported. According to Dow Jones, investigators uncovered "new and pervasive accounting violations." ¶¶ 18-21, 81- 83. III. ARGUMENT A. The Standards Of Fed. R. Civ. P. 23(a) Have Been Met Federal Rule of Civil Procedure 23 ("Rule 23") requires a two-step analysis to determine whether class certification is appropriate. First, the action must satisfy the four prerequisites of Rule 23(a): (1) the class is so numerous that joinder of all members is impracticable (numerosity); (2) there are questions of law or fact common to the class (commonality); (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class 6 3 (typicality); and (4) the representative parties will fairly and adequately protect the interests of the class (adequacy). 5 See Freeland v. Iridium World Communications, Ltd., 233 F.R.D. 40, 42 (D.D.C. 2006); In re Vitamins Antitrust Litig., 209 F.R.D. 251, 256 (D.D.C. 2002). Second, the action must satisfy one of the requirements of Rule 23(b) (with 23(b)(3) relating to predominance of common questions of law or fact and the superiority of the class action mechanism). Id. This action satisfies each of these requirements. Courts widely recognize that class actions are an appropriate means to enforce the federal securities laws. See, e.g., Basic Inc. v. Levinson, 485 U.S. 224 (1988); In re Newbridge Networks Sec. Litig., 926 F. Supp. 1163, 1176 (D.D.C. 1996) ("[C]ourts have widely recognized the utility of, and the necessity for, class actions in securities litigation.") (citations omitted); Foltz v. U.S. News & World Report, Inc., 111 F.R.D. 49 (D.D.C. 1986). See also In re Bank One Sec. Litig./First Chi. S'holder Claims, Case No. 00 CV 0767, 2002 U.S. Dist. LEXIS 8709, at * 7 (N.D. Ill. May 9, 2002) ("[S]ecurities fraud cases are uniquely situated to class action treatment since the claims of individual investors are often too small to merit separate lawsuits.") (quoting King v. Kansas City S. Indus., Inc., 519 F.2d 20 (7th Cir. 1975)). Accordingly, Rule 23 is liberally interpreted so as to facilitate certification of class actions. In re Bearingpoint, Inc. Sec. Litig., 232 F.R.D. 534, 2006 U.S. Dist. LEXIS 1718, at * 11-12 (E.D. Va. Jan. 17, 2006) ("it is important to bear in mind that, 'in light of the importance of the class action device in securities fraud suits', the requirements of Rule 23 'are to be construed liberally'") (quoting, Gary Plastic Packing Corp. v. Merrill Lynch, Pierce, Fenner & 5 Recent amendments to Rule 23 require that the adequacy of counsel determination, originally analyzed under Rule 23(a)(4), be made under Rule 23(g), which became effective December 1, 2003. See Jones v. Ford Motor Credit Co., No. 00-8330, 2005 U.S. Dist. LEXIS 5381 at *81 (S.D.N.Y. Mar. 31, 2005) ("although Rule 23(g) replaces the adequacy test as originally developed under Rule 23(a)(4), it largely incorporates the adequacy standards developed thereunder"). 7 3 Smith, Inc., 903 F.2d 176, 179 (2d Cir. 1990)). "[W]hen a court is in doubt as to whether or not to certify a class action, the court should err in favor of allowing the class to go forward." In re Indep. Energy Holdings, PLC Sec. Litig., 210 F.R.D. 476, 479 (S.D.N.Y. 2002) (citation omitted). See also Eisenberg v. Gagnon, 766 F.2d 770, 785 (3rd Cir. 1985) ("The interests of justice require that in a doubtful case. . . any error, if there is to be one, should be committed in favor of allowing a class action."); Vitamins, 209 F.R.D. at 258 ("courts tend to favor class certification when in doubt."); In re Blech Sec. Litig., 187 F.R.D. 97, 102 (S.D.N.Y. 1999) ("Class action treatment of related claims is particularly appropriate when plaintiffs seek redress for violations of the securities laws. It is well recognized that private enforcement of these laws is a necessary supplement to government regulation….Accordingly, in an alleged securities fraud case, when a court is in doubt as to whether or not to certify a class action, the court should err in favor of allowing the class to go forward.") (citations omitted). Determining whether an action may be maintained as a class action does not involve a resolution of the merits of the suit. In this regard, the Supreme Court has stated: [the Court has no] authority to conduct a preliminary inquiry into the merits of a suit in order to determine whether it may be maintained as a class action. . . . In determining the propriety of a class action, the question is not whether the plaintiff or plaintiffs have stated a cause of action or will prevail on the merits, but rather whether the requirements of Rule 23 are met. Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 177-78 (1974) (citation omitted). Accordingly, "[c]ourts must not venture too deeply into the merits of a case in deciding whether to certify a class." Freeland, 233 F.R.D. at 44. Further, in evaluating a motion for class certification, a complaint's allegations are assumed to be true and the analysis is limited to a review of whether plaintiffs have complied with the requirements of Rule 23. See, e.g., Lorazepam, 202 F.R.D. at 14; Malone v. Microdyne 8 3 Corp., 148 F.R.D. 153, 156 (E.D. Va. 1993). 6 Finally, the Supreme Court has reiterated that the "dominant concern" governing Rule 23 applicability is "whether a proposed class has sufficient unity so that absent [class] members can fairly be bound by decisions of class representatives." Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 621 (1997). As demonstrated below, this case easily satisfies all of the requirements for class certification. 1. The Numerosity Requirement Is Satisfied Rule 23(a)(1) requires that the class be so numerous that joinder of all members is impracticable. "Impracticability does not mean impossibility of joinder, but refers to the difficulty or inconvenience of joinder." Indep. Energy, 210 F.R.D. at 479. Impracticability of joinder is not determined solely by a numerical test, and impracticability of joinder is generally assumed in class action suits involving nationally traded securities. See Ballard v. Blue Shield of S.W. Va., Inc., 543 F.2d 1075, 1080 (4th Cir. 1976), cert. denied, 430 U.S. 922 (1977); Ganesh, L.L.C. v. Computer Learning Ctrs., Inc., 183 F.R.D. 487, 489 (E.D. Va. 1998) ("no mechanical test"). In the same vein, Lead Plaintiffs are not required to quantify the precise number of persons in the class to demonstrate impracticability of joinder where such a conclusion is clear from reasonable estimates and the Court may make common sense assumptions to support a finding of numerosity. See, e.g., In re Initial Pub. Offering Sec. Litig., 227 F.R.D. 65, 86-87 (S.D.N.Y. 2004) (precise calculation not required; court may rely on reasonable inferences). 6 On February 9, 2006, this Court denied all Defendants' motions to dismiss the initial consolidated complaint, holding that it stated claims under the federal securities laws. On April 17, 2006, Lead Plaintiffs filed an Amended Consolidated Class Action Complaint to include options traders within the class definition and to expand the Class to include purchasers who purchased prior to Fannie Mae releasing all the news and information concerning the fraud. 9 3 While Lead Plaintiffs do not presently know the exact number of Class members, there can be no dispute that the Class is sufficiently numerous. ¶ 289. 7 As of July 31, 2004, Fannie Mae had approximately 967,903,726 shares of common stock issued and outstanding and its securities, including its common stock and options, actively traded on the NYSE. See Vitamins, 209 F.R.D. at 258 ("There is no set number requirement as long as plaintiffs provide a reasonable basis for their estimate."); Lorazepam, 202 F.R.D. at 26 (same). Further, because Fannie Mae securities traded on national exchanges during the Class Period, it is reasonable to infer that members of the Class are dispersed throughout the United States. Such geographical dispersion among potential claimants also militates in favor of class treatment. See Stewart v. Rubin, 948 F. Supp. 1077, 1088 (D.D.C. 1996), aff'd, 124 F.3d 1309 (D.C. Cir. 1997) (245 member class spread throughout the country satisfies numerosity requirement); In re Southeast Hotel Props. Ltd. P'ship Investor Litig., 151 F.R.D. 597, 601 (W.D.N.C. 1993) (over 400 limited partners throughout the United States satisfied numerosity requirement). Accordingly, numerosity is amply satisfied here. 2. There Are Questions Of Law And Fact Common To The Class. Rule 23(a) provides that an action may be maintained as a class action if there are questions of law or fact common to the class. In determining whether common questions exist, Rule 23(a)(2) requires only that there must exist a common nucleus of operative facts or law; commonality does not require that all questions of law or fact be common. Instead, "[t]he commonality test is met where there is at least one issue, the resolution of which will affect all or a significant number of the putative class members." Pigford v. Glickman, 182 F.R.D. 341, 348 7 The identity of the members of the Class and the exact number of these members can be obtained through discovery. McCarthy v. Kleindienst, 741 F.2d 1406, 1410 (D.C. Cir. 1984); Committee of Blind Vendors v. District of Columbia, 695 F. Supp. 1234, 1242 (D.D.C. 1988). 10 3 (D.D.C. 1998) (quoting Lightbourn v. County of El Paso, 118 F.3d 421, 426 (5th Cir. 1997), cert. denied, 522 U.S. 1052 (1998)); See also Initial Pub. Offering, 227 F.R.D. at 87 ("A single common question may be sufficient to satisfy the commonality requirement.") (citation omitted). In the context of federal securities actions, courts have liberally applied the "common question" requirement. For example, in Lewis v. Capital Mortg. Invs., 78 F.R.D. 295, 304 (D. Md. 1977), the court held that the alleged misrepresentations in, and omissions from, public filings were sufficiently similar and presented common questions of law and fact that predominated over individual questions: [i]t is well-established that a class action is appropriate in securities fraud cases involving similar or identical misrepresentations even if they are issued at different times [citations omitted]. Moreover, the courts generally have been quite liberal in certifying class actions in such cases, recognizing that 'it is a rare case that involves but one fraudulent statement'. . . . Id. (citations omitted). See also Blech, 187 F.R.D. at 104 (holding that the commonality requirement has been applied permissively in securities fraud litigation). Thus, the "common question" requirement is satisfied where, as here, the Complaint alleges that Defendants, in a series of public statements and documents issued during the Class Period, misrepresented and failed to disclose material facts concerning Fannie Mae's financial condition and results. ¶¶ 182-287. In re Medical Corp. Sec. Litig., 139 F.R.D. 74, 78 (D. Md. 1991) ("a course of repeated misrepresentations will satisfy the commonality requirement.") (citing Lewis, 78 F.R.D. at 304). See also Newbridge Networks, 926 F. Supp. at 1176 (allegations of common questions of law and fact supported certification where complaint pled defendants' issuance of material misstatements and omissions in documents and public statements disseminated to the public during the class period). 11 3 Here, the Complaint identifies numerous common issues of fact and law, all amenable to aggregate proof through evidence of Defendants' conduct. These common issues include: (a) whether Defendants' Class Period public statements and reports misrepresented and/or omitted material information; (b) whether Defendants violated federal securities laws by the acts and/or omissions alleged; (c) whether Defendants acted with scienter in issuing false and misleading statements during the Class Period; (d) whether the Individual Defendants are liable as control persons under the federal securities laws; and (e) whether the members of the Class have sustained damages and, if so, the proper measure of damages. ¶ 293. Proof of these issues, which concern Defendants' common course of conduct, will not vary appreciably from one Class member to another and will advance the claims of all Class members. Where "issues are 'central' to [plaintiffs'] cause[s] of action under [the federal securities laws], the commonality requirement is satisfied." Dunnigan v. Metropolitan Life Ins. Co., 214 F.R.D. 125, 137 (S.D.N.Y. 2003). The Complaint's allegations thus amply satisfy the commonality requirement of Rule 23(a)(2). 3. Lead Plaintiffs' Claims Are Typical Of Those Of The Members Of The Class Under Rule 23(a)(3), a proposed class representative must demonstrate that "the claims 12 3 or defenses of the representative parties are typical of the claims or defenses of the class." 8 The typicality requirement is met "if each class member's claim arises from the same course of events that led to the claims of the representative parties and each class member makes similar legal arguments." Lorazepam, 202 F.R.D. at 27 (quoting Pigford, 182 F.R.D. at 349); Vitamins, 209 F.R.D. at 260; Simpson v. Specialty Retail Concepts, Inc., 149 F.R.D. 94 (M.D.N.C. 1993); Covelo Indian Cmty. v. Watt, 551 F. Supp. 366, 377 (D.D.C. 1982). This requirement "is not demanding." Forbush v. J.C. Penney Co., 994 F.2d 1101, 1106 (5th Cir. 1993) (citing Shipes v. Trinity Indus., 987 F.2d 311, 316 (5th Cir. 1993)). The focus of Rule 23(a)(3)'s typicality test is whether the proposed representatives' claims are possessed by the other members of the proposed class, making the proposed representatives' conduct or peculiarities completely immaterial. See, e.g., Southeast Hotel Props., 151 F.R.D. at 605 (for typicality analysis, it is irrelevant "whether there is a similarity in personal backgrounds or knowledge between individuals"). "Typicality" does not require class representatives' claims to be identical to the Class' claims: Typicality...does not require that the claims of the named representatives be 'co-extensive with' or 'identical to' those of the other class members. Rather, this requirement [of typicality] is satisfied even though varying fact patterns support the claims or defenses of individual class members or there is disparity in the damages claimed by the named parties and the other members of the class. In re Kirschner Medical Corp. Sec. Litig., 139 F.R.D. 74, 79 (D. Md. 1991) (citing National Constructors Ass'n v. National Elec. Contractors Ass'n, 498 F. Supp. 510, 545 (D. Md. 1980), 8 Courts have recognized that the typicality requirement of Rule 23(a)(3) significantly overlaps with the commonality requirement of Rule 23(a)(2) and the adequacy of representation requirement of Rule 23(a)(4). See, e.g., General Tel. Co. of the Southwest v. Falcon, 457 U.S. 147, 157 n.13 (1982). 13 3 modified 678 F.2d 492 (4th Cir. 1982)). See also Thomas v. Albright, 139 F.3d 227, 238 (D.C. Cir. 1998) ("as with the requirement of commonality, the facts and claims of each class member do not have to be identical to support a finding of typicality."); United States v. Trucking Employers, Inc., 75 F.R.D. 682, 687 (D.D.C. 1977) ("If the interests of all class members coincide with respect to the merits of the suit, then in advocating their own interests the named parties will necessarily represent the interests of absentees as well"). Therefore, "[f]actual variations between claims will not defeat typicality." Meredith v. Mid-Atlantic Coca Cola Bottling Co., 129 F.R.D. 130, 133 (E.D. Va. 1989). In fact, in a securities fraud action "it is defendants' course of conduct. . . the release to the press of the allegedly fraudulent and misleading statements upon which the court must focus in determining typicality." In re IGI Sec. Litig., 122 F.R.D. 451, 456 (D.N.J. 1988) (emphasis in original). See also In re Sumitomo Copper Litig., 194 F.R.D. 480, 482 (S.D.N.Y. 2000) ("When inquiring into the typicality requirement…the focus must be on the defendants' behavior and not that of plaintiffs."). Plaintiffs' claims satisfy the typicality requirement if, as here, they arise "from the same course of events, and each class member makes similar legal arguments to prove the defendant's liability." In re Drexel Burnham Lambert Group, 960 F.2d 285, 291 (2nd Cir. 1992); Lorazepam, 202 F.R.D. at 27 (same). Lead Plaintiffs' claims here are plainly typical of those of the Class. Plaintiffs, like the absent Class members, purchased Fannie Mae securities during the Class Period and sustained damages due to Defendants' material misrepresentations and omissions. "In the context of a case that implicates Section 10 of the Securities Exchange Act of 1934. . . and Rule 10b-5. . . the commonality of these questions and the typicality of the named Plaintiffs' claims cannot credibly be denied." Ganesh, 183 F.R.D. at 489. 14 3 Furthermore, since Rule 23(a)(3)'s requirements are readily met in federal securities actions, courts routinely reject challenges to the typicality of a plaintiff's claims predicated on inevitable factual variations such as individual sophistication, investment strategies, reliance or other particulars surrounding the purchases of the securities at issue. Indeed, in a Section 10(b) action, such individual questions are irrelevant to typicality due to the rebuttable presumption of reliance stemming from the "fraud-on-the-market-theory." Basic, 485 U.S. at 241-42 (adopting the fraud-on-the-market doctrine and dispensing with the requirement that an investor was personally aware of a particular misstatement prior to purchasing his stock). 9 As the Supreme Court recognized in Basic, where materially misleading statements were disseminated into an impersonal, well-developed market for securities: An investor who buys or sells stock at the price set by the market does so in reliance on the integrity of that price. Because most publicly available information is reflected in market price, an investor's reliance on any public material misrepresentations, therefore, may be presumed for purposes of a Rule 10b-5 action. 485 U.S. at 247. Nor can Defendants rebut the presumption of reliance on the class motion, because to attempt to do so would require the Court to engage in the type of inquiry into the merits of Plaintiffs' claims prohibited by Eisen, 417 U.S. at 177. "[W]hether or not [plaintiff] in fact relied on the integrity of the market goes to the merits of the case and is therefore an inappropriate matter for the Court to consider on a motion for class certification." Seidman v. American Mobile Sys., 157 F.R.D. 354, 361 (E.D. Pa. 1994) (citing Eisen, 417 U.S. at 177-78). 9 See Gilbert v. First Alert Inc., 904 F. Supp. 714, 719-20 (N.D. Ill. 1995) (citing Basic, 485 U.S. at 247) (Under the fraud-on-the-market doctrine, "a plaintiff need not allege that he actually relied on the misstatement"). 15 3 As a result, where the fraud-on-the-market doctrine applies, as here, purported "unique defenses" based on the relative sophistication of the proposed class representatives are wholly irrelevant to class certification, because "[t]he securities laws afford protection to all investors, both sophisticated and unsophisticated." In re Gulf Oil/Cities Serv. Tender Offer Litig., 112 F.R.D. 383, 388 (S.D.N.Y. 1986). See also Basic, 485 U.S. at 242. "Plaintiff as a professional investor, the class members as amateurs, and indeed, those who choose stock by means of ouija board or by throwing darts at the list, all believe as an article of faith that the market is an honest market, representing the sum total of the effects on price, supply and demand of shares, of all public information." Kolin v. American Plan Corp., No. CV-84-3183, 1986 U.S. Dist. LEXIS 27057 at *26-27 (E.D.N.Y. Apr. 8, 1986) (citation omitted). Therefore, highly sophisticated investors, including market professionals, are regularly certified as class representatives. See, e.g., Kalodner v. Michaels Stores, Inc., 172 F.R.D. 200, 205-06 (N.D. Tex. 1997). 10 Likewise, the courts have consistently held that investment strategies are not relevant in a fraud-on-the-market case. See, e.g., Kirby v. Cullinet Software, Inc., 116 F.R.D. 303, 308 (D. Mass. 1987) ("investment strategy is of little importance to. . . suitability as a class representative"); Tolan v. Computervision Corp., 696 F. Supp. 771, 779-80 (D. Mass. 1988) ("[i]t is of no consequence that the putative plaintiffs devised different investment strategies").11 10 See Hanon v. Dataproducts Corp., 976 F.2d 497, 506 (9th Cir. 1992) ("Differences in sophistication, etc., among purchasers have no bearing in the impersonal market fraud context, because dissemination of false information necessarily translates through market mechanisms into price inflation which harms each purchaser identically."); Blackie v. Barrack, 524 F.2d 891, 905 (9th Cir. 1975). 11 See also Fine v. American Solar King Corp., 919 F.2d 290, 299 (5th Cir. 1990) ("The evidence upon which [defendant] relies demonstrates only that the named Plaintiffs had their own investment strategies and motives in purchasing [the subject] stock"); Moskowitz v. Lopp, 128 F.R.D. 624, 631 (E.D. Pa. 1989) ("traders in puts and calls rely on the integrity of information disseminated in the market just as do purchasers and sellers of the underlying 16 3 In fact, even investors who engage in "erratic, counterintuitive, or speedy trading practices" have been found typical, because "[t]he securities laws. . . exist for the protection of every investor, not just the conservative or wise investor." In re Electro-Catheter Sec. Litig., Civ. No. 87-41, 1987 U.S. Dist. LEXIS 13500 at *12 (D.N.J. Dec. 3, 1987). Regardless of Lead Plaintiffs' investment strategies or transactions in Fannie Mae securities, each has claims typical of the Class at large. Whether Lead Plaintiffs, for example, performed their own research before making investment decisions or relied on the recommendations of others, are also irrelevant to Lead Plaintiffs' typicality. See, e.g., In re Worldcom, Inc. Sec. Litig., 219 F.R.D. 267, 281-82 (S.D.N.Y. 2003) ("swiftly" rejecting defendants' argument that the institutional plaintiffs relied on, among other things, "highly sophisticated investment managers" and "computer models that replicate the portfolio of the S&P 500," and stating, "[e]ach of these methods of making investment decisions is representative of methods used by many other investors"). Indeed, "courts have adopted an 'indirect reliance' theory under which the plaintiff's friend's or broker's reliance on misleading information suffices to establish reliance. . . . Therefore, even if. . . some of the plaintiffs relied exclusively on the advice of others in buying stock. . . that. . . would not prove plaintiffs' claims atypical." Electro-Catheter, 1987 U.S. Dist. LEXIS 13500 at *10-11. As the Court held in In re Data Access Systems Securities Litigation, 103 F.R.D. 130, 139 (D.N.J. 1984): [D]iffering types of reliance are present in almost every securities class action. There will always be some individuals who read the financial statements directly, others who read secondary analyses such as Moody's or Value Line, and many others who relied on the security….shareholders of every large, publicly traded corporation includes [sic] institutional investors, short-sellers, arbitragers, etc. The fact that these traders have divergent motivations in purchasing shares should not defeat the fraud-on-the-market presumption. . . ."). 17 3 advice of stockbrokers or friends. If defendants' argument were to prevail that factual differences of this nature were sufficient to defeat class action certification, there could never be a class action of securities purchasers. Further, as long as plaintiffs' claims arise from the same practice and course of conduct that forms the basis of the Class claims, it is immaterial to this analysis when, during the Class Period, plaintiffs purchased their Fannie Mae securities. Irrespective of "'whether [plaintiffs] and other class members bought early in the Class Period or late, they are all alleged to have been injured by the inter-related misstatements and omissions.'" In re Bally Mfg. Sec. Corp. Litig., 141 F.R.D. 262, 268 (N.D. Ill. 1992) (quoting Nicholas v. Poughkeepsie Sav. Bank, [1990- 1991 Transfer Binder], Fed. Sec. L. Rep. (CCH) ¶ 95,606 at 97,840 (S.D.N.Y. Sept. 26, 1990)). See also Yang v. Odom, No. 02-5968 (JAP), 2005 U.S. Dist. LEXIS 18089 at *14-16 (D.N.J. Aug. 16, 2005) ("class representatives are not atypical by virtue of acquiring shares late into the class period"). As the Court stated in Ziemack v. Centel Corp., 163 F.R.D. 530, 535 (N.D. Ill. 1995), "[w]hen a securities action class plaintiff alleges a common course of conduct spanning a class period, the particular date when he purchased does not vitiate the typicality of his claims." 12 The types of Fannie Mae securities Plaintiffs purchased during the Class Period are equally inapplicable to this analysis. It is well established that a purchaser of one type of security of a given issuer may represent purchasers of other types of securities of that issuer where defendants, as here, are alleged to have engaged in a common course of fraudulent 12 See also Blackie, 524 F.2d at 910 (stating, with respect to class certification, "the potential conflict [between early and late purchasers] is present in most prolonged classes involving a series of misrepresentations."); Gilbert v. First Alert, Inc., 165 F.R.D. 81, 83 (N.D. Ill. 1996) ("because the plaintiffs have alleged a common scheme against all purchasers of First Alert stock, the named plaintiffs are permitted to represent prior and subsequent purchasers of stock without undermining their typicality"). 18 3 conduct that affected all issues similarly. See, e.g., In re Sepracor, Inc. Sec. Litig., 233 F.R.D. 52, 56 (D. Mass. 2005) ("purchasers of different types of securities have often been found qualified to represent purchasers of other types of securities of the same issuer"); In re Enron Corp. Sec. Litig., 206 F.R.D. 427, 445 (S.D. Tex. 2002) ("When plaintiffs have alleged such a common course of conduct, courts consistently have found no bar to class certification even though members of a class may have purchased different types of securities or interests."); Deutschman v. Beneficial Corp., 132 F.R.D. 359, 371 (D. Del. 1990) (certifying plaintiff who never purchased common stock to represent all purchasers of both common stock and call options). 13 Therefore, whether Lead Plaintiffs purchased call options, sold put options, or purchased common stock or other types of Fannie Mae securities is irrelevant to their ability to represent the Class. Indeed, the fraud-on-the-market doctrine applies to any instrument whose value is tied to the common stock of a corporation, including options. 14 See In re Oxford Health Plans, Inc. 13 See also Eisenberg, 766 F.2d at 786 (named plaintiffs "were not untypical because they invested in two different limited partnerships or because members of the class may have invested in either of these two or a third….these were identical investments prepared by the same defendants, and containing the same alleged omissions and misrepresentations"); Schur v. Friedman & Shaftan, P.C., 123 F.R.D. 611, 613-14 (N.D. Cal. 1988) (Plaintiff who invested in one limited partnership may represent investors in related limited partnerships where common overarching scheme to defraud was alleged); In re Saxon Sec. Litig., No. 82-Civ-3103, 1984 U.S. Dist. LEXIS 19223 at *19 (S.D.N.Y. Feb. 23, 1984) (debenture holders could represent debenture holders and common stockholders because debenture holders had "an interest identical to that of the holders of common stock in demonstrating a common course of fraudulent conduct and in implicating defendants in that conduct."). 14 A put option permits the buyer of the option to require the seller, at any time during a fixed period, to sell the company's common stock at a set price, commonly referred to as the "exercise price." See generally Hochschuler v. G.D. Searle & Co., 82 F.R.D. 339, 342 n.6, 346- 47 (N.D. Ill. 1978). The greater the amount by which the market price for the stock exceeds the exercise price, the lower the market will price the put option. Similarly, a call option permits the purchaser of the option to purchase the underlying stock at a set exercise price. Thus, an inflated stock price will result in an inflated price for the call option. Accordingly, Defendants' alleged 19 3 Sec. Litig., 199 F.R.D. 119, 124 (S.D.N.Y. 2001) ("Oxford II") ("where the public market of a quoted security is polluted by false information, or where price, supply and demand are distorted as a result of misleading omissions, all types of investors are injured") (citation omitted). See also Moskowitz, 128 F.R.D. at 635 ("the price of the option is directly related to the price of the stock"); Kirby, 116 F.R.D. at 308 ("The court has found no case law to suggest that covered calls in this context render a representative atypical."); Hochschuler, 82 F.R.D. at 347 ("The fact that the sale of a put involves different considerations does not render [a plaintiff's] claim atypical. The put option seller must prove the same case as the common stock purchaser would.") (citation omitted). 15 Accordingly, Plaintiffs satisfy the Rule 23(a)(3) typicality requirement. 4. Lead Plaintiffs Will Fairly And Adequately Protect The Interests Of The Class Rule 23(a)(4) requires that "the representative parties will fairly and adequately protect the interests of the class." Initial Pub. Offering, 227 F.R.D. at 88 (citation omitted); Simpson, 149 F.R.D. at 102. This requirement is met here because: (a) Lead Plaintiffs have interests in common with, and not antagonistic to, 16 the interest of the other members of the Class; and (b) scheme created artificial prices for Fannie Mae's options which directly corresponded with the artificial prices Defendants created for the Company's common stock. 15 Unlike a short seller, a put seller does not "gamble on a predicted loss" on the common stock. Ganesh, 183 F.R.D. at 491. A drop in the stock market value increases the likelihood that the seller of the put (i.e. the investor who has an obligation to purchase the security) will be forced to purchase the stock at the exercise price, for a loss. The return of the price to its true value also diminishes the ability of the put seller to "buy back" the option because the "premium" increases. In short, it would cost the investor more than he would receive on the "sell." Thus, the put seller, like the common stock purchaser, is harmed by an artificially inflated stock price and equally would be ill-served by a subsequent material decrease in that price. 16 For a conflict of interest to be sufficiently serious to defeat class certification, Defendants must make "an actual showing of a real probability of a potential conflict." Scholes v. Stone, McGuire 20 3 Lead Plaintiffs' attorneys are qualified, experienced, and competent to conduct the litigation. Id. See also Kirschner, 139 F.R.D. at 79; Lewis v. National Football League, 146 F.R.D. 5, 19 (D.D.C. 1992); Covelo, 551 F. Supp. at 377; Arnett v. American Nat'l Red Cross, 78 F.R.D. 73, 75 (D.D.C. 1978). Both prongs of the "adequacy" test are met here. First, Lead Plaintiffs have no interests antagonistic to those of the Class; indeed, their interests are directly aligned with the interests of the Class Members. The false and misleading statements made by the defendants during the Class Period artificially inflated the price of Fannie Mae's securities. Lead Plaintiffs and the other members of the Class purchased Fannie Mae securities during the Class Period and have been similarly damaged by Defendants' alleged misconduct. The claims of Lead Plaintiffs and the absent Class members arise from the same wrongful conduct and they all seek redress under the same legal theories. Each proposed class representative has the same interest in recovering damages caused as a result of the Defendants' unlawful conduct. No cognizable conflicts or antagonisms exist between Lead Plaintiffs and the other members of the Class. Further, OPERS and STRS are precisely the kind of class representatives Congress envisioned when it enacted the Private Securities Litigation Reform Act of 1995 ("PSLRA"). & Benjamin, 143 F.R.D. 181, 187 (N.D. Ill. 1992). In order to deny class certification, the court must find a "fundamental conflict or inconsistency between the claims of the proposed class members" that is "so palpable as to outweigh the substantial interest of every class member in proceeding with the litigation." In re NASDAQ Market-Makers Antitrust Litig., 169 F.R.D. 493, 514-15 (S.D.N.Y. 1996). Courts reject "efforts by Defendants to defeat certification by raising the possibility of hypothetical conflicts or antagonisms among class members, especially regarding proof of damages." Id. at 513 (citations omitted). See also Blackie, 524 F.2d at 909. For instance, as discussed above, the timing of plaintiffs' purchases of the subject securities during the class periods is irrelevant as long as the representatives' claims arise from the same practice and course of conduct that forms the basis of the class claims. See, e.g., Robbins v. Moore Med. Corp., 788 F. Supp. 179, 187 (S.D.N.Y. 1992) ("Whether plaintiff and other class members bought early in the Class Period or late, they are all alleged to have been injured by the inter-related misstatements and omissions. . ."). See also Eisenberg, 766 F.2d at 785. 21 3 Lead Plaintiffs are institutional investors and have experience serving as class representatives in other securities fraud litigations, including Ohio Public Employees Retirement System and State Teachers Retirement System of Ohio v. Freddie Mac, et al., Lead Case No. 03-CV-4261, U.S. District Court, Southern District of New York, and In re Global Crossing Ltd. Securities Litigation, Case No. 02-CV-910, U.S. District Court, Southern District of New York. Lead Plaintiffs understand the duties and responsibilities of being class representatives in a securities class action and have been fulfilling those duties in this case, by vigorously prosecuting this litigation. Further, Lead Plaintiffs have demonstrated their adequacy by retaining counsel extensively experienced in securities class action litigation to prosecute the claims of the class in this case. 17 On January 13, 2005, this Court approved Waite, Schneider, Bayless & Chesley Co., L.P.A. as Lead Counsel and Berman DeValerio Pease Tabacco Burt & Pucillo as Co-Lead Counsel for the Lead Plaintiffs and the putative class pursuant to the PSLRA. These firms have done extensive work in investigating and identifying the claims brought in this action and have 17 Rule 23(g), providing for the appointment of class counsel, complements Rule 23(a)(4)'s requirement that class counsel be adequate. Ford Motor Credit, 2005 U.S. Dist. LEXIS 13224 at *81 (noting that 23(g) incorporates the adequacy of counsel analysis formerly performed under Rule 23(a)(4)). Rule 23(g) direct a court to appoint "class counsel" when a class is certified. Fed. R. Civ. P. 23(g)(1)(A). Consistent with Rule 23(a)(4), class counsel "must fairly and adequately represent the interests of the class." Fed. R. Civ. P. 23(g)(1)(B). In appointing class counsel, the Court must consider: • the work counsel has done in identifying or investigating potential claims in the action, • counsel's experience in handling class actions, other complex litigation, and claims of the type asserted in the action, • counsel's knowledge of the applicable law, and • the resources counsel will commit to representing the class. Fed. R. Civ. P. 23(g)(1)(C)(i). The Court may consider any other matter pertinent to counsel's ability to fairly and adequately represent the interests of the class. Fed. R. Civ. P. 23(g)(1)(C)(ii). 22 3 zealously represented their clients in this action, including by vigorously and successfully arguing against all Defendants' motions to dismiss. Both firms also have extensive experience and expertise in complex class actions, and have successfully prosecuted securities class action cases throughout the country. The firm profiles of Waite, Schneider, Bayless & Chesley Co. L.P.A. and Berman DeValerio Pease Tabacco Burt & Pucillo are attached hereto as Exhibits A and B respectively. As the counsel selected by Lead Plaintiffs are qualified, experienced and have demonstrated their capability of prosecuting this action diligently and competently on behalf of the class, Lead Plaintiffs respectfully request that the Court appoint Waite, Schneider, Bayless & Chesley Co. L.P.A. as Lead Class Counsel and Berman DeValerio Pease Tabacco Burt & Pucillo as Co-Lead Class Counsel pursuant to Rule 23(g)(1)(A). B. The Requirements Of Rule 23(b)(3) Are Satisfied In addition to satisfying the requirements of Rule 23(a), Lead Plaintiffs must satisfy Rule 23(b)(3), which requires the Court to find that: (1) questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and (2) that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. As discussed below, this case satisfies both of these criteria. 1. Common Questions Of Law And Fact Predominate Predominance is met "when there exists generalized evidence which proves or disproves an element on a simultaneous, class-wide basis, since such proof obviates the need to examine each class members' individual position." Vitamins, 209 F.R.D. at 262. "In determining whether the predominance standard is met, courts focus on the issue of liability, and if the liability issue is common to the class, common questions are held to predominate over individual ones." Kirschner, 139 F.R.D. at 80. Unlike certain other types of class actions, such as mass tort 23 3 personal injury cases, the Supreme Court has held "[p]redominance is a test readily met in certain cases alleging. . . securities fraud. . . ." Amchem Prods., 521 U.S. at 625. As set forth above, the core issues of liability common to the entire Class involve the allegedly unlawful public dissemination of materially false and misleading statements concerning Fannie Mae in press releases, public reports and SEC filings. It is well-established that "[i]n determining whether common questions of fact predominate, a court's inquiry is directed primarily toward whether the issue of liability is common to members of the class." Indep. Energy, 210 F.R.D. at 486; Kirschner, 139 F.R.D. at 80 (same). Securities fraud cases are typically found to satisfy the predominance requirement, since defendants' liability to the entire class will be based on a common course of conduct. See In re Arakis Energy Corp. Sec. Litig., No. 95-3431, 1999 U.S. Dist. LEXIS 22246 at *37 (E.D.N.Y. Apr. 27, 1999) ("In securities fraud class actions in which the fraud is alleged to have been carried out through public communications to a wide variety of market participants, common issues of law and fact will generally predominate over individual issues."); RMED Int'l, Inc. v. Sloan's Supermarkets, Inc., No. 94 Civ. 5587 (PKL), 1996 U.S. Dist. LEXIS 3531 at *21 (S.D.N.Y. Mar. 25, 1996) (The issue of "whether defendants failed to disclose material non-public information. . . thereby committing a fraud on the market. . . is the same for all class members, and therefore predominates over the class."). Moreover, "Rule 23(b)(3) does not require that all questions of law or fact be common; it only requires that the common questions predominate over individual questions." Dura-Bilt Corp. v. Chase Manhattan Corp., 189 F.R.D. 87, 93 (S.D.N.Y. 1981). See also Lorazepam, 202 F.R.D. at 29 ("The common issues must only predominate; they do not have to be dispositive of the litigation."). As the court explained in In re Oxford Health Plans, Inc. Sec. Litig., 191 F.R.D. 24 3 369, 374 (S.D.N.Y. 2000) ("Oxford I"), "[c]ommon questions may predominate where there exists a common course of conduct even though there is not a complete identity of facts….Where, as here, there exists a common nucleus of operative facts affecting all members, common questions unquestionably prevail." (citation omitted). Given that the predominance test focuses on the nature of the claims asserted, differences in the amount of damages recoverable by individual Class members are irrelevant to class certification. See, e.g., Worldcom, 219 F.R.D. at 302 ("individualized damage issues are not ordinarily a bar to class certification."); Switzenbaum v. Orbital Scis. Corp., 187 F.R.D. 246, 248 (E.D. Va. 1999) ("All of the Plaintiffs appear to share a similar interest in recovering from the Defendants, and the fact that the amount of their damages may differ does not pose a disabling risk of prejudice or confusion because separate claims for payment could be processed if liability were found."). In fact, as courts have noted, "[i]ndividual questions of damages are typical in class actions." DeLoach v. Philip Morris Cos., 206 F.R.D. 551, 566 (M.D.N.C. 2002) (emphasis added). See also Barabin v. ARAMARK Corp., 210 F.R.D. 152, 160 (E.D. Pa. 2002) ("awarding damages normally entails examination of individual claims"), aff'd, No. 02-8057, 2003 U.S. App. LEXIS 3532 (3d Cir. Jan. 24, 2003); In re Warfarin Sodium Antitrust Litig., 212 F.R.D. 231, 249 (D. Del. 2002) ("[T]he need for individual damages calculations does not defeat predominance and class certification."); Indep. Energy, 210 F.R.D at 486 ("While damage amounts may vary, the claims are based on a common legal theory of material misrepresentations and omissions such that common questions clearly predominate."); NASDAQ Market-Makers, 169 F.R.D. at 523-24 ("even if it develops that each class member's damages must be separately determined, class certification would still be appropriate"). This is because "[t]he amount of damages is invariably an individual question and does not defeat class action 25 3 treatment. ....the process of computing individual damages will be virtually a mechanical task." Blackie, 524 F.2d at 905 (citations omitted). Further, where, as here, Lead Plaintiffs allege a series of misrepresentations and omissions that were made as part of a common course of conduct or in furtherance of a single scheme to inflate the issuer's stock price, which continued throughout the Class Period, certification is appropriate for the entire period. As the Ninth Circuit stated in Blackie, when faced with a proposed class period spanning twenty-seven months and involving forty-five documents issued during that period: Confronted with a class of purchasers allegedly defrauded over a period of time by similar misrepresentations, courts have taken the common sense approach that the class is united by a common interest in determining whether a defendant's course of conduct is in its broad outlines actionable, which is not defeated by slight differences in class members' positions, and that the issue may profitably be tried in one suit. *** [L]ike standing dominoes. . . one misrepresentation. . . cause[s] subsequent statements to fall into inaccuracy and distortion when considered by themselves or compared with previous misstatements. 524 F.2d at 902-04. (citations and footnote omitted). For these reasons, courts have consistently certified classes extending over substantial periods of time – far longer than the 53 months alleged here – where there was a continuous scheme and a common course of misrepresentations and omissions over the entire class period. See, e.g., Saxon, 1984 U.S. Dist. LEXIS 19223 at *15 (the court certified a class period of six years, stating: "[i]t is not uncommon in securities fraud cases, where plaintiffs allege a continuing course of fraudulent conduct which spans a number of years, for courts to certify classes for periods approaching or exceeding the length of the class period here."). See also In re 26 3 Technical Equities Federal Sec. Litig., No. C-86-20157(A)WAI, 1998 U.S. Dist. LEXIS 15813 at *8 (N.D. Cal. Oct. 3, 1988) (finding 6 year and seventh month class period "appropriate"). Likewise, the fact that Class members may have relied on different documents at different times during the Class Period does not affect the predominance of the common questions applicable to all Class members. As the court in Steiner v. Equimark Corp., 96 F.R.D. 603, 612 (W.D. Pa. 1983) held: [T]he fact that members of the class may not have had the same information available to them because of the various documents issued by Defendants at different times and because of changes in the state of the economy during that period, does not preclude class certification. Where, as here, Plaintiffs' allegations relate to a common course of conduct, common issues predominate over any individual issues which may be raised by the varying amounts of information available. 18 In sum, the misrepresentations and omissions upon which Lead Plaintiffs' claims are founded injured each member of the Class in a substantially similar, if not identical, manner. They were prepared and disseminated by Defendants as part of an interrelated and common course of conduct to distort the price of Fannie Mae's securities. The Complaint alleges no conduct particular to Lead Plaintiffs that was not directed at every member of the Class in the same manner and to the same effect. Accordingly, since Lead Plaintiffs allege that Defendants' misrepresentations and omissions were all part of the same pattern and scheme to defraud, the 18 See also Kennedy v. Tallant, 710 F.2d 711, 717 (11th Cir. 1983) ("[Plaintiff] claimed and later proved that [defendants] committed the same unlawful acts in the same method against an entire class. Thus, all members of th[e] class have identical claims."); In re Storage Tech. Corp. Sec. Litig., 113 F.R.D. 113 (D. Colo. 1986) ("While there may not have been a consistent 'quantum of hype' throughout the 28 month period, and while the alleged misrepresentations relate to different STC projects, there is sufficient commonality to support class certification"); Seidman v. Stauffer Chem. Corp., Civil No. B-84-543(TFGD), 1986 U.S. Dist. LEXIS 30264 at *12 (D. Conn. July 28, 1986) ("the fact that the alleged misrepresentation are contained in a number of different documents, each of which pertains to a different period of defendants' operation, or to a different accounting practice, does not preclude this Court from certifying the putative class."). 27 3 common issues of fact and law arising from Defendants' conduct predominate over any individual issues and satisfy the standard for class certification under Rule 23(b)(3). 2. A Class Action Is Superior To Other Available Methods For The Fair And Efficient Adjudication Of This Action In determining whether the "superiority" requirement of Rule 23(b)(3) is satisfied, the Court must consider: (a) the interest of members of the class in individually controlling separate actions; (b) the extent and nature of any related litigation already commenced by class members; (c) the desirability of concentrating the litigation of the claims in the particular forum; and (d) the potential difficulties of managing a class action. Jarvaise v. Rand Corp., 212 F.R.D. 1, 4 (D.D.C. 2002); Fed. R. Civ. P. 23(b)(3). In this case, each of these factors strongly militates in favor of class certification. First, the expense of individual actions, weighed against the potential small individual recoveries of the vast majority of Class members here, would be prohibitive. Although some Class members may have suffered damages substantial enough that it might be economically viable for them to bring their own suits, this fact does not support a finding that Class members have an interest in individually "controlling" the litigation under Rule 23(b)(3). The reference in Rule 23(b)(3) to the interest of individual Class members in controlling the litigation relates to the interests of most or all of the Class members – rather than the interests of only a few – since if only a small fraction of the Class has an interest in controlling the litigation, they may serve their interest by opting out of the suit. 1 H. Newberg, Newberg on Class Actions § 4.29 at 332 (3d ed. 1992). Second, the burden on the courts of adjudicating hundreds of thousands of separate Fannie Mae investor actions would be, to say the least, significant. See Arakis, 1999 U.S. Dist. LEXIS 22246 at *38 ("were plaintiffs required to bring individual actions, the potential for duplicative litigation and consequent waste of judicial and party resources would be 28 3 significant."). Third, there is no other litigation outside of this action asserting the claims Lead Plaintiffs are pursuing here. Finally, there is no reason to believe that Lead Plaintiffs' attorneys, who have experience in securities class action litigation, including in this District, will encounter significant or unusual difficulties in managing this litigation. Thus, it is clear that securities suits such as this one satisfy the superiority requirement of Rule 23. Most violations of the federal securities laws, such as those alleged in the Complaint, inflict economic injury on large numbers of geographically dispersed persons to such an extent that the cost of pursuing individual litigation to seek recovery is not feasible. In the present case there are a large number of injured individuals, many with damage claims too small to justify the expense of individual actions, and each of whom possesses effectively identical claims against Defendants. Because the requirements of Federal Rule of Civil Procedure 23 are fully satisfied, the proposed Class should be certified. IV. CONCLUSION For the foregoing reasons, Lead Plaintiffs, Ohio Public Employees Retirement System and State Teachers Retirement System of Ohio, respectfully request that the Court grant their motion for class certification. Dated: May 17, 2006 Respectfully submitted, ATTORNEY GENERAL OF OHIO JIM PETRO WAITE, SCHNEIDER, BAYLESS & CHESLEY CO., L.P.A. /s/ Stanley M. Chesley Stanley M. Chesley James R. Cummins (DC Bar #0H0010) Melanie S. Corwin 1513 Fourth & Vine Tower One West Fourth Street Cincinnati, Ohio 45202 29 3 Tel: 513/621-0267 Fax: 513/621-0262 E-mail: jcummins@wsbclaw.com Special Counsel for the Attorney General of Ohio and Lead Counsel for Lead Plaintiffs Ohio Public Employees Retirement System and State Teachers Retirement System of Ohio BERMAN DEVALERIO PEASE TABACCO BURT & PUCILLO /s/ Jeffrey C. Block Jeffrey C. Block Kathleen M. Donovan-Maher Julie A. Richmond One Liberty Square Boston, MA 02109 Tel: 617/542-8300 Fax: 617/542-1194 E-mail:jblock@bermanesq.com Co-Lead Counsel for Lead Plaintiffs Ohio Public Employees Retirement System and State Teachers Retirement System of Ohio COHEN, MILSTEIN, HAUSFELD & TOLL, P.L.L.C. /s/ Steven J. Toll Steven J. Toll (DC Bar #225623) Daniel S. Sommers (DC Bar #416549) Matthew K. Handley (DC Bar #489946) 1100 New York Avenue, N.W. Washington, DC 20005 Tel: 202/408-4600 Fax: 202/408-4699 E-mail:stoll@cmht.com Local Counsel for Lead Plaintiffs Ohio Public Employees Retirement System and State Teachers Retirement System of Ohio 30 3 OF COUNSEL: BARRETT & WEBER L.P.A. C. Francis Barrett Suite 500, 105 East Fourth Street Cincinnati, Ohio 45202 Tel: 513/721-2120 Fax: 513/721-2139 Special Counsel for the Attorney General of Ohio STATMAN, HARRIS, SIEGEL & EYRICH, LLC Alan J. Statman (0012045) Jeffrey P. Harris (0023006) 2900 Chemed Center 255 East Fifth Street Cincinnati, Ohio 45202 Tel: 513/621-2666 Fax: 513/587-4477 E-mail:ajstatman@shselegal.com E-mail:jharris@shselegal.com 31