Fired Fannie Mae workers' defamation lawsuit dismissed

Dozens of fired Fannie Mae workers are mulling their next steps after a judge dismissed their defamation complaint against the mortgage giant.

U.S. District Judge Leonie M. Brinkema last week granted Fannie Mae and the governments' motions to dismiss the lawsuit, seven months after it was filed. The case was dismissed without prejudice, meaning it can be refiled. The plaintiffs, 61 U.S. citizens of Indian origin, accused the government and Federal Housing Finance Agency Director Bill Pulte of defaming them in statements following a mass firing last April. 

The plaintiffs' terminations stemmed from their participation in a company matching donation program, according to descriptions by both parties. In March the government shed more light on the firing, suggesting it stemmed from a Department of Justice inquiry which began during the Biden administration. 

The judge's ruling was first reported by the Washington Post. 

Attorney Milt Johns of Executive Law Partners, representing the plaintiffs, told National Mortgage News Tuesday his clients were considering an appeal in the defamation case, while their similar breach of contract and discrimination complaint in a Washington, D.C. federal court remains pending.

"We are still hopeful that our clients will receive justice," wrote Johns in an email. "We have not been given any explanation or evidence regarding what each plaintiff did, other than making donations to Indian/Telugu supporting, Fannie Mae-approved charities."

Spokespersons for both the FHFA and Fannie Mae didn't return requests for comment Wednesday.

A yearlong investigation

The plaintiffs' lawsuit focused on a press release by the FHFA, in which Pulte claimed over 100 Fannie workers were fired for unethical conduct and facilitating fraud. The workers also pointed to comments Pulte made in a Fox News appearance, in which he described the workers as "making donations to the charity and then getting kickbacks."

In a motion to dismiss last month, Fannie Mae said the DOJ notified it in May 2024 that it was probing organizations that received funds from its workers via the matching donations program. The flagged organizations were all associated with the India-based Telugu ethno-linguistic group. 

"Fannie Mae was advised that employees may have used the company's Matching Gifts Program to funnel money to those organizations in exchange for personal benefits," the motion read. 

The GSE began its own probe, and after completing the yearlong investigation fired workers who it found violated multiple policies including Fannie's Fraud Risk Management policy. 

According to the Washington Post, Judge Brinkema said it appeared "quite cruel" the way the plaintiffs were fired, but sided with the government's legal defenses regarding officials' public comments about the firings.

Fighting fraud

In the D.C. case, the same parties are arguing over potential arbitration and evidentiary hearings. That court has not responded to the sides' filings since December. 

The ex-workers also sued ex-Fannie Mae CEO Priscilla Amodovar in a Virginia court for defamation, for thanking Pulte in a public statement for rooting out unethical conduct. That lawsuit was dismissed in January. 

The mass firing was part of several early fraud-related announcements at the government-sponsored enterprises by Pulte, who also installed himself as chairman of both Fannie and Freddie Mac. The leader also claimed the FHFA shared criminal referrals regarding Chinese and North Korean non-citizens working at the GSEs, although the government hasn't shared an update on those potential cases.