Fired Fannie Mae workers can’t sue agency head for defamation, a judge rules

President Donald Trump’s federal housing director made bombshell claims on prime-time TV last year, saying he had just fired dozens of Fannie Mae employees because of rampant fraud under the guise of making charitable donations.

“They were making donations to the charity, and then they were getting kickbacks,” Bill Pulte, director of the Federal Housing Finance Agency, told Fox News host Laura Ingraham. “So, we’ve just scratched the surface. But this is all part of this fraud, waste and abuse.”

One year later, Pulte has yet to release evidence of fraud by the Fannie Mae employees he terminated, all of whom share Indian-national origins, and none of whom were charged with crimes. A federal judge ruled last week that Pulte could not be sued for defamation over his statements, dismissing a lawsuit filed by 61 former Fannie Mae employees who called his account a complete fabrication that had upended their lives.

Legal experts said it appeared to be the first time a federal agency head has been ruled immune from a defamation lawsuit under the Westfall Act, a decades-old law that gives broad legal immunity to federal employees performing their official duties. Courts have ruled in prior cases that the law shields members of Congress, military commanders and rank-and-file government workers from defamation claims, but U.S. District Judge Leonie M. Brinkema appears to be the first to apply that immunity to the director of a federal agency.

The ruling could have wider ramifications as top Trump administration officials lob accusations of criminal conduct at migrants, protesters, Democratic politicians and law enforcement officials who have investigated the president. Pulte has made several high-profile fraud accusations against Trump’s critics that later fell apart under scrutiny by prosecutors and judges.

A federal judge in D.C. said in a ruling this month that the Justice Department had “no evidence whatsoever of fraud” against the Federal Reserve in an ongoing investigation by U.S. Attorney Jeanine Pirro’s office over the cost of the central bank’s building renovations. The Centers for Medicare and Medicaid Services last week corrected claims by a top health regulator, Mehmet Oz, who had suggested in March that there was widespread fraud in New York’s Medicaid program.

“The lack of accountability emboldens officials,” said Mike Fox, a legal fellow at the libertarian Cato Institute who argues that Congress should curtail federal employees’ immunities under the Westfall Act. “There’s no consequences.”

Fannie Mae, a key player in the home mortgage industry, is a private company that has been run by federal housing regulators since the 2008 financial crisis. Pulte serves as the company’s board chairman.

Some fired workers said in interviews that they were donating to Indian ethnic charities through an online portal run by Fannie Mae. The company provided up to $5,000 per year in matching contributions to approved organizations, they said. The 61 plaintiffs “were all employees in good standing … and had never received any form of disciplinary action,” according to their lawsuit. Their attorney, Milt Johns, said none of them received kickbacks for donating to the charities. Each plaintiff sought more than $2 million in damages from Pulte and Fannie Mae.

A spokesperson for Pulte did not respond to questions from The Washington Post. In a court filing, attorneys for Fannie Mae said the Justice Department had notified the company in 2024 of a criminal investigation into charities associated with the Telugu community from India. “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,” according to the filing.

Venkateswara Chittepu, one of the plaintiffs, said he had worked as a Fannie Mae contractor since 2002 and as a full-time software developer since 2017. He said he donated several times through the Fannie Mae portal to charities serving the Telugu community. Then, last April, he and about 100 other employees, almost all from the Telugu community like him, were summoned to a Microsoft Teams video call and told they were being fired “for cause” for defrauding Fannie Mae’s charitable giving program, according to the lawsuit.

Chittepu said the employees never got exit letters or evidence to support Pulte’s claims of fraud. “He made our lives so hard and painful,” Chittepu said.

The sole breadwinner in his family, with a house in Virginia and two children in college, Chittepu said his life is now “upside-down.” Pulte’s allegations have clouded his job prospects in the federal government and in financial software development, he said.

“The insurance is gone, the paycheck is gone, and everything is gone – in one day, just like that,” Chittepu said after a hearing Friday in U.S. District Court in Alexandria, Virginia, where more than 50 fired Fannie Mae workers and their family members packed the courtroom gallery.

Rep. Suhas Subramanyam (Virginia) and two other House Democrats sent a letter last year to the Federal Housing Finance Agency requesting details about the firings and fraud allegations, which Pulte made on Fox News, social media and in a news release that quoted him saying “we fired over 100 employees from Fannie Mae who we caught engaging in unethical conduct, including facilitating fraud.” The lawmakers did not get responses because, they were told, their questions touched on “personnel issues,” according to a spokesperson for Subramanyam.

Under the Wesftall Act, the Justice Department decides on a case-by-case basis whether a federal employee facing a lawsuit was acting within the scope of their official duties. If so, the United States becomes the defendant, instead of the employee. A separate law, the Federal Tort Claims Act, says the United States has not waived its sovereign immunity from defamation lawsuits.

Paul Figley, an expert on the Westfall Act and professor emeritus at American University Washington College of Law, said Brinkema simply interpreted those laws as they were written by Congress. A Trump-appointed interim U.S. attorney in Virginia, Erik S. Siebert, had certified under the Westfall Act that Pulte was performing his official duties when he made public statements about the firings. A top Justice Department official, Todd Blanche, now the acting attorney general, later reaffirmed that position in another court filing.

Congress “did not want every press release or decisions made by government employees subject to tort suits,” Figley said. “That’s a policy decision Congress can change, but it’s extremely unlikely that it will,” he added.

Fox, the Cato Institute researcher, agreed that Brinkema had no choice but to dismiss the lawsuit. “It seems ridiculous, but she’s not the one writing the law,” he said.

The U.S. attorney’s office for the Eastern District of Virginia did not argue that Pulte’s fraud claims were true. An assistant U.S. attorney, Dennis Barghaan, said in legal filings that engaging with the news media was part of the job for federal agency heads. “False (and thus defamatory) statements remain within the scope of employment,” the Justice Department argued in one filing.

“Courts have held that federal employees remain within the scope of their employment when speaking with the media about their work – even when the words that they speak are defamatory,” Barghaan argued in another filing.

Brinkema said at the hearing last week that she was “not unsympathetic” to the former Fannie Mae workers’ plight. The judge said it was possible Pulte never had evidence of fraud. But, she added, Pulte’s “comments about what happens in Fannie Mae are clearly within the scope of his employment,” and “the government has not waived sovereign immunity for defamation cases.”

“It does appear to be quite cruel to terminate the plaintiffs in the way they were here,” the judge said.

The attorney for the fired workers said they were weighing whether to appeal Brinkema’s ruling. Many of the same plaintiffs have filed a lawsuit in U.S. District Court in D.C., alleging discrimination and contract violations. That case is pending.