As co-lead counsel representing the Massachusetts Pension Reserves Investment Management Board, Berman Tabacco reached a settlement of $170 million to resolve claims that Fannie Mae failed to disclose a growing exposure to high-risk mortgages that led to federal conservatorship in 2008. Plaintiffs alleged that Fannie Mae embarked on a multi-year strategy to shift its focus away from investing in, guaranteeing and securitizing safe, “plain vanilla” loans, and toward risky subprime and “Alt-A” loans. Defendants allegedly hid this material shift from investors by failing to disclose the company’s inability to adequately gauge the risk of these subprime and Alt-A loans. The settlement, which was approved in March 2015, was reached after extensive and hard-fought document and deposition discovery. The case provided an exemplary recovery for shareholders, where the plaintiffs faced difficult case-specific impediments – most notably, Fannie Mae’s conservator, the Federal Housing Finance Agency, promulgated a rule (which plaintiffs would have challenged) stating that it could choose not to satisfy judgments against Fannie Mae; and the Second Circuit issued its opinion in Central States v. Federal Home Loan Mortgage Corp., et al., No. 12-4353 (2d Cir. Nov. 5, 2013), which significantly impacted plaintiffs’ ability to prove loss causation based on similar, if not identical, disclosures.