Summary of today's DISCOVERY HEARING w JUDGE SWEENEY
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malebaboon Wednesday, 05/07/14 01:52:36 PM
Re: None
Post # of 212388
So I'm back from Judge Sweeney's Court.
The government lawyer asked plaintiff's lead lawyer, Charles Cooper, before the hearing started, "How long do you plan on keeping us here today?" Cooper said, "Have you out by 12:15."
The hearing was over at 11:45.
The gist of the conference was that Fairholme wanted to give the Judge a heads-up that the government is balking at less than full cooperation, and that government refuses to turn over any documents from Fannie and Freddie related to the expectations of their future profits.
Cooper said, "We're not here to settle any disputes, but there is an 'unanticipated complication': the justice dept will not gather or produce documents from Fannie Mae and Freddie Mac because they say they are private entities and they don't have custody of the
companies' documents, although in the past the government has acknowledged custody. Serious disputes are arising about document requests."
Cooper continued: "We have served third party document requests on the companies, but this dispute has matured to the point of consideration."
Cooper then reviewed the case history with an emphasis on 'conservatorship' vs. 'receivership' and reminded the court that it had granted authority to plaintiffs to uncover documents related to the future profitability of FnF and why the government had allowed FnF's capital structure to remain in place.
Then Cooper summarized the current government position on providing the requested documents:
1)Government states it will not produce any documents related to its expectations of FnF profits in the future.
2) The government will not provide docs related to government expectations in 2012 of future FnF profitability
3) government will not provide documentation of its assessment of the value of its warrants
4)no documentation related to Treasury's original commitment of funds related to the 10% super-preferreds.....
On the second consideration of the Motion to allow Discovery:
1) the government will not provide documentation of when, how and if at all FnF will be released from conservatorship or whether private shareholders will be allowed to participate in future profits at the companies
2)government refuses to produce any documents about its 'wind-down' plan or returning FnF to free-market status.
3)Government is only willing to allow inquiry into whether FHFA acted as an agent of the Treasury or at 'the direct behest' of the Treasury.
Cooper pointed out the absurdity of this narrow position with which the government was trying to trap the discovery process:
'we don't expect to find an e-mail from Treasury saying 'You will do as you are told!' (Sweeney smiled at this) We do expect to find
lots of information regarding Treasury 'being in the driver's seat' and that statements by FHFA that their only obligation was to taxpayers and none to shareholders answers the question of the relationship between leadership at FHFA and leadership at Treasury. Basically, government will not produce anything related to the 'net worth sweep' and that (and here's the bombshell) Government will be coming up with a protective order for the court to prevent any discovery into the documents they refuse to allow.'
Cooper finished by saying, "we want to put the court on notice that we may need to call on their good offices to allow us to pursue discovery as you ordered.'
Judge Sweeney then spoke, saying that she wanted both parties to know that she saw her role as facilitating communication and that they should immediately come to her with disputes 'before the pot boils' and angry emails start being exchanged. She then made reference to a question she had regarding docket #39 in District Court with Judge Lamberth (#33, #34?) to 'supplement the administrative record. Cooper said that no action had been taken in Judge Lamberth's court.
Then Greg Schwinn spoke for Justice Department; 'the pot is not boiling' he said 'we have not exchanged bitter emails'. We have exchanged emails about the extent of the allowable search.'
Sweeney interrupted to remind Schwinn that 'I tend to allow broad discovery. I will allow plaintiff's every opportunity, this is a citizen's court, after all. I think this court has jurisdiction, and plaintiffs will have their day in court.'
Schwinn could be heard to audibly begin to whine about the 'very aggressive schedule' that the government could meet if there was a more narrow definition of discovery.
Sweeney interupted again to say 'I will allow more time, if necessary, to make for a complete discovery.'
Schwinn begins to get more argumentative and aggressive: 'we don't need more time' Sweeney says 'I get that' and Schwinn says 'We assert objections' and Sweeney visibly stiffened.
Schwinn was becoming more aggressive and hostile in his tone - "We hope we can narrow the scope"
Sweeney's eyes narrow and there is palpable tension in the court.
Schwinn: 'this is about only one event - the third amendment to the stock purchase agreement, and the plaintiff's case attempts to implicate the HERA statute that gives all rights to the conservator - we raised this issue in our order to dismiss.' Schwinn goes on trying to split hairs and have it both ways between Government, Treasury, FHFA and FnF relationships.
Schwinn: "Plaintiffs are risking the discovery schedule. We will file a protective order, if needed."
Sweeney: "I want any party to obtain the entire scope of their discovery, over adhering to a deadline. I want justice, and to know the complete set of facts."
Schwinn: "we demand they adhere to the issues."
Sweeney; "I see that the interpretation of my order is at issue. I probably hold a broader view of discovery issues than the Department of Justice (lawyers) would hold. I will give you a little view behind the curtain. If we need to have a hearing on discrete issues I'm happy to become involved. Keep this case on track." Court adjourned.
My take was that government continues to balk and complain and is becoming more and more passive-aggressive in its maneuvers. Sweeney will not allow this. Let's see what does happen, but expect the government lawyers to fill a 'protective order' in the next week or two, and I'm pretty sure there will be another hearing in two weeks.
MB
