WASHINGTON–A court has ruled against former Fannie Mae CEO Daniel Mudd in his effort to have dismissed a lawsuit filed by the SEC that accuses him of concealing the mortgage finance agency's exposure to risky loans in the run-up to the 2008 financial crisis.
U.S. District Judge Paul Crotty in Manhattan ruled the SEC can take Mudd to trial over claims he concealed $441 billion of risky loans before Fannie Mae's September 2008 government seizure.
As part of his ruling, Crotty said a jury could find that Fannie Mae's disclosures about its exposure to subprime loans and Alt-A loans, a category between prime and subprime, were misleading.
The judge said the SEC has put forward evidence from which a jury could conclude Mudd knew or should have known that public statements he made about Fannie Mae's exposure to risky loans, as well as the company's disclosures, were false or misleading.
"From these facts, a rational jury could infer that Mudd acted with intent or recklessness," Crotty wrote.