Fannie Mae-No Politics (FNMA)

[TII]

DEFENDANT’S OPPOSITION TO THE APPLICATION OF TIMOTHY HOWARD FOR ACCESS TO PROTECTED INFORMATION
Document #95
IN THE UNITED STATES COURT OF FEDERAL CLAIMS
FAIRHOLME FUNDS, INC., et al.,
Plaintiffs,
v.
THE UNITED STATES,
Defendant.
)
)
)
)
)
)
)
)
)
No. 13-465C
(Judge Sweeney)
DEFENDANT’S OPPOSITION TO THE APPLICATION
OF TIMOTHY HOWARD FOR ACCESS TO PROTECTED INFORMATION
Pursuant to paragraph 7 of the Protective Order in this case, the United States respectfully
requests that the Court deny the application of Timothy Howard for access to protected
information. Mr. Howard is a former employee of the Federal National Mortgage Association
(Fannie Mae, along with Freddie Mac, the Enterprises) who believes that the Government is
responsible for the loss of his career and reputation. He has expressed a desire to play a part in
public discourse regarding mortgage finance policy. Mr. Howard also holds common and
preferred stock in Fannie Mae. For these reasons, there is significant risk that Mr. Howard may
– knowingly or inadvertently – use protected information in a manner inconsistent with the
obligations in the Protective Order. Accordingly, it is not appropriate to grant Mr. Howard
access to confidential and sensitive information in this case.
Mr. Howard was vice chairman and chief financial officer at Fannie Mae until 2004,
when he resigned in the face of allegations of financial improprieties and ongoing investigations
into Fannie Mae’s accounting practices. See http://www.washingtonpost.com/wpdyn/
articles/A17241-2004Dec21.html (Ex. A). In 2006, the Office of Federal Housing and
Enterprise Oversight (OFHEO, the predecessor to the Federal Housing Finance Agency, or FHFA
charged him and two other senior Fannie Mae executives with, among other things,
earnings mismanagement, failure to ensure adequate internal controls, and the release of
misleading financial reports. See http://www.fhfa.gov/Media/PublicAffairs/Pages/OFHEOFiles-
Notice-of-Charges-Against-Former-Fannie-Mae-Executive-Franklin-Rains,-Timothy-
Howard-and-Leanne-Spencer.aspx (Ex. B). In 2008, the charges against him and the other
executives were settled pursuant to consent orders in which the executives agreed to pay more
than $31 million. See http://www.reuters.com/article/2008/04/18/fanniemae-executivessettlement-
idUSN1847607420080418 (Ex. C). Mr. Howard is currently still unemployed.
In late 2013, Mr. Howard authored a book titled The Mortgage Wars, Inside Fannie Mae,
Big-Money Politics, and the Collapse of the American Dream, in which he offers his take on the
demise of Fannie Mae and the collapse of the United States home mortgage market.
Significantly, Mr. Howard makes clear in his book that he believes he is the victim of the
Government’s overregulation of the Enterprises and that the 2006 charges against him were
unfounded. See id. at 223-25 (in speeches and interviews he has called the charges against him
“invented.”).
Mr. Howard has stated publicly that he desires “to be part of the debate over the future of
Fannie Mae and its counterpart, Freddie Mac,” and that he sees his book as part of that initiative.
See http://www.usatoday.com/story/money/business/2014/01/27/former-fannie-mae-cfomortgage-
wars/4773547/ (Ex. D) (“I want to re-insert myself into the public discussion . . . .”).
In other words, Mr. Howard wishes not only to restore his reputation, but to play a public role in
the future of the Enterprises.
There is significant reason to be concerned about potential violations of the Protective
Order. Mr. Howard’s statements demonstrate that he believes that he lost his
career and reputation because of the Government’s regulation of the Enterprises. His deeply-held beliefs
may color not only his view of confidential documents in this case, but also his willingness and
ability to abide by the terms of the Protective Order both during and after the conclusion of
litigation. See Shell Petroleum, Inc. v. United States, No. 97-945, 2001 WL 36142015 at *5 n.7
(Fed. Cir. 2001) (identifying lack of trustworthiness and the inability to follow the protective
order as two bases to object to access under the protective order). Permitting Mr. Howard access
to protected information unnecessarily places the confidentiality of that information at risk. U.S.
Steel Corp. v. United States, 730 F.2d 1465, 1469 (Fed. Cir. 1984). Stated differently, the
Government should not be subjected to the additional risk of providing its confidential and
sensitive information to purported experts and consultants with such a long-standing and
personal interest in the litigation. Even if he were not to intentionally misuse the information,
Mr. Howard intends to continue to be involved in public discussions about mortgage finance and,
as a result, could inadvertently disclose protected information.
In addition, counsel for Fairholme has confirmed that Mr. Howard owns common and
preferred shares in Fannie Mae. Thus, Mr. Howard has a personal financial stake in the outcome
of this litigation. A shareholder with those interests has an incentive to release confidential
information to increase the price of his shares. The opportunity for financial gain is a fact that
must be considered by the Court in considering the level of risk that would be presented by
granting the application of any expert or consultant for access to confidential and sensitive
information. Standard Space Platforms Corp. v. United States, 35 Fed. Cl. 505, 509 (1996)
(central question is whether there is “any greater risk” that the expert/consultant would misuse
confidential information as compared to other experts).1
We have previously identified the Government’s need to protect certain sensitive
information from inadvertent or intentional disclosure, see Def’s Mot. for Prot. Order at 10-16
(Doc. 49), and it is appropriate for the Court to give great weight and careful consideration to
these concerns here. Mr. Howard’s past relationship with Fannie Mae, his subsequent public
statements, and the nature of the Government’s documents in this case weigh heavily against
granting Mr. Howard access to these documents. We respectfully request that the Court consider
our reasonable concerns that interested persons such as Mr. Howard should not be allowed
access to confidential and sensitive information that the Court has compelled the Government to
disclose.
Finally, plaintiffs will not be prejudiced if the Court denies Mr. Howard access to
protected information. In fact, Mr. Howard’s utility as a consultant may be limited given that the
documents in this case are from 2008 and beyond, but his employment with Fannie Mae was
terminated in 2004. Plaintiffs are free to employ – and have employed – other financial
consultants to assist in review of the protected documents produced by the Government and the
Enterprises in this case. And, of course, plaintiffs are free to consult with Mr. Howard as to all
matters not contained in protected documents and to take advantage of his recollection of events
at Fannie Mae to the extent these events are relevant. Plaintiffs cannot seriously contend that
their ability to understand the documents or to respond to the Government’s motion to dismiss
will be harmed by denying Mr. Howard’s application. Therefore, the potential harm to the
¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬¬________________________________________
1 Plaintiffs will respond that Mr. Howard has volunteered not to trade in Fannie
Mae/Freddie Mac securities during the pendency of the litigation. This does not resolve the
problem. Not only is Mr. Howard’s offer not legally binding, but he still stands to benefit from
any increase in share price after the litigation.
Government from inadvertent or advertent disclosure of its protected information clearly
outweighs any hardship on plaintiffs by restricting Mr. Howard’s access to protected
information. Phoenix Solutions, Inc. v. Wells Fargo Bank, N.A., 254 F.R.D. 568, 581 (N.D. Cal.
2008).
For these reasons, the United States respectfully requests that the Court deny Mr.
Howard’s application for access to protected information under the Protective Order in this case.
Respectfully submitted,
September 11, 2014
STUART F. DELERY
Assistant Attorney General
s/ Robert E. Kirschman, Jr.
ROBERT E. KIRSCHMAN, JR.
Director
s/ Kenneth M. Dintzer
KENNETH M. DINTZER
Acting Deputy Director
Commercial Litigation Branch
Civil Division
U.S. Department of Justice
P.O. Box 480
Ben Franklin Station
Washington, DC 20044
Telephone: [phone]
Facsimile: [phone]
Email: [e-mail]
Attorneys for Defendant

*****Exhibits A-E (pages 6-21 of this 21 page filing) are not included in this post, but they are previous articles and documents that attempt to backup the Defendant's above statements.*****