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Joe Light ?@joelight · 27m27 minutes ago
Is government considering settlement in Fannie/Freddie cases? Perry Capital lawyer says they're open to it but gov expresses no interest
Obit, as always, thank you for your time and effort in sharing your knowledge.
Obit, I was wondering if you would care to share your thoughts on the Delaware law Perry Amicus Brief found here under the Center For Individual Freedom filing. It appears to have serious legal legs, yes?
I'm sure any legal insight you might have would be greatly appreciated by all.
Sorry cmdr, wasn't trying to put you down. I just didn't get that from your post and it appeared DoNot felt the same.
Yes Donot, cmdr is wrong or just not answering correctly. The Status conf scheduled for 7/7 was always closed to the public, but Tuesday morning it was also canceled to be rescheduled for a later date as I understand it.
Hope this helps.
In addition to Freddie Mac, Fannie Mae and CSS, participants in the Industry Advisory Group will come from:
-- The Center for Responsible Lending
-- Financial Services Roundtable
-- Fixed Income Clearing Corporation
-- Mortgage Bankers Association
-- Independent Community Bankers Association
-- American Bankers Association
-- Securities Industry and Financial Markets Association
-- Structured Finance Industry Group
________________________________________________________
It has started....Time to figure out friend and foe from this group of eight!
MB, here's a link to all of the complete Perry case Amicus Briefs filed on 7/6/2015.
Amicus Briefs Filed In Appellate Court In Support Of Fannie Mae Plaintiffs
Hope this helps.
Yep. Man, fly on the wall, I wish. Hopefully Sweeney is tiring of all of this Govt BS. One can hope I guess.
Dollars, thanks again for the time and money you have invested in posting these filings.
One thing is for sure, we now know Ackman still has his 10% of FnF commons, as of yesterday's filing at least. Not that I ever doubted it.
Sure is hvpatel. July should be a very busy month for the Fairholme case, at least until the Gov't asks for more delays into August that is.
07/06/2015 182 RESPONSE to 164 MOTION to Stay Briefing on Defendant's Supplemental Motion to Dismiss , filed by USA.Reply due by 7/16/2015. (Hosford, Elizabeth) (Entered: 07/06/2015)
07/06/2015 183 Unopposed MOTION for Extension of Time until 7/13/2015 to To Respond To Plaintiffs' Motion To Remove The "Protected Information" Designation From Certain Grant Thorton Documents , filed by USA.Response due by 7/23/2015.(Acevedo, Mariana) (Entered: 07/06/2015)
And you've probably heard of this guy. Oh what a web.
Bob Ryan
Special Advisor to FHFA Director Mel Watt (one of only four)
In his current capacity Bob Ryan advises Director Watt on issues pertaining to FHFA’s role as
Regulator and Conservator of the Enterprises. Bob was most recently Senior Vice President
of capital markets at Wells Fargo Home Mortgage. He was responsible for strategic policy
issues impacting capital markets and the mortgage company. Prior to his position at Wells
Fargo he was Senior Advisor to HUD Secretary Donovan, the Acting FHA Commissioner
and Assistant Secretary for Housing and prior to that, first Chief Risk Officer for FHA. In
that capacity, Bob was responsible for establishing a new Office of Risk Management, which
oversees FHA’s credit risk management functions, encompassing all of its insurance product
lines, including single family, multifamily and healthcare. That office has expanded FHA’s
capacity to assess financial and operational risk, perform more sophisticated data analysis,
and respond quickly to changes in the market.
Bob has nearly 30 years of experience in all aspects of the mortgage market, with extensive
profit and loss accountability and a deep understanding of the mortgage origination and
capital markets processes. Prior to HUD Bob was at Freddie Mac, where he held several senior
positions in capital markets, single family pricing and credit and the office of the President.
Price was $2.21 at 3:19pm
Price was $2.22 at 4:00pm (40 minutes later)
Price range between 3:19 and 4:00pm was...$2.20 to $2.22
Man, I hope it gets this bad everyday during that time.
It just gets worse and worse
The next 40 minutes are gonna get bad
Dollars, no problem and correct things better get interesting real fast.
Regarding...(4) the need for guidance from the Court regarding certain issues that have arisen during depositions, and are likely to arise at future depositions, including, for example, the propriety of certain instructions not to answer...Sweeney should (and better) be saying to the defendants, Evidence objected to shall be taken subject to the objections. They can object to a question, but they still have to answer with a noted objection. Depos are not their place to object an not answer as I understand it.
July 7th Joint Status Conference and what they will be discussing...
IN THE UNITED STATES COURT OF FEDERAL CLAIMS
No. 13-465C (Judge Sweeney)
FAIRHOLME FUNDS, INC., et al., Plaintiffs,
v.
THE UNITED STATES, Defendant.
JOINT STATUS REPORT REGARDING JULY 7 STATUS CONFERENCE
This Court scheduled a status conference for July 7, 2015 at 1 p.m. Doc. 174 (June 29, 2014) ("June 29 Order"). The parties hereby notify the Court that they expect to discuss the following topics at the July 7 status conference: (1) the current status of the discovery authorized by the Court; (2) the current discovery schedule and the need for an additional extension of the discovery deadline; and (3) the timing of motions to remove the "Protected Information" designation from materials produced during discovery. In addition, Plaintiffs propose to discuss two additional topics: (4) the need for guidance from the Court regarding certain issues that have arisen during depositions, and are likely to arise at future depositions, including, for example, the propriety of certain instructions not to answer; and (5) Plaintiffs’ pending motion to stay briefing on the Government’s supplemental motion to dismiss.
The parties hereby notify the Court that the following attorneys for the Fairholme Plaintiffs plan to appear in person at the status conference:
? Charles J. Cooper, Cooper & Kirk, PLLC
? David H. Thompson, Cooper & Kirk, PLLC
? Vincent J. Colatriano, Cooper & Kirk, PLLC
Case 1:13-cv-00465-MMS Document 180 Filed 07/06/15 Page 1 of 2
The following attorneys for the United States plan to appear in person:
? Kenneth M. Dintzer
? Elizabeth M. Hosford
? Gregg M. Schwind
Consistent with the June 29 Order, all attorneys who will appear for the parties have been admitted to the Protective Order in this case. Because the Court directed that the July 7 status conference shall be closed to the public, counsel for the parties in this case has not made arrangements for attorneys for the plaintiffs in related cases to listen to the status conference via telephone. The Government requests that a telephone line be made available for Katherine Brandes, counsel from the Department of the Treasury, to listen to the status conference.
Date: July 6, 2015 Respectfully submitted, BENJAMIN C. MIZER
Principal Deputy Assistant Attorney General
s/ Robert E. Kirschman, Jr.
ROBERT E. KIRSCHMAN, JR.
Director
s/ Kenneth M. Dintzer
KENNETH M. DINTZER
Deputy Director
Commercial Litigation Branch
U.S. Department of Justice
P.O. Box 480 Ben Franklin Station
Washington, D.C. 20044
(202) 616-0385
(202) 307-0972 fax
KDintzer@CIV.USDOJ.GOV
Attorneys for Defendant
s/ Charles J. Cooper
Charles J. Cooper
Counsel of Record for Plaintiffs
COOPER & KIRK, PLLC
1523 New Hampshire Avenue, N.W.
Washington, D.C. 20036
(202) 220-9600
(202) 220-9601 (fax)
ccooper@cooperkirk.com
Of counsel:
Vincent J. Colatriano
David H. Thompson
Peter A. Patterson
Brian W. Barnes
COOPER & KIRK, PLLC
1523 New Hampshire Avenue, N.W.
Washington, D.C. 20036
(202) 220-9600
(202) 220-9601 (fax)
Looks like the Deloitte and PwC lawyers are involved now. Looks like the Adam Spittler and Mike Ciklin papers may have hit home. This is good.
Thanks for posting Dollars!
Yeah, I got there from a different route...
https://ecf.cadc.uscourts.gov/
then click on...
Login to PACER (View Docket Sheets and Documents)(log in)
then put in case#...
six in one, half a dozen....
Nice thing is with the link above you can also see the courts calendar for Oral Arguments as well other important info under the Case Information tab. Hope this helps.
Thanks!
No worries, I got it now. I figured out my mistake.
Dollars, where are you getting the Perry Appeals case info? I been looking at the United States Court of Appeals for District of Columbia Circuit - Recent Entries, but don't seem to see anything related to it, even the Class Action Appellant Perry Brief 6-30-15 was never listed there.
Are you just doing a general pacer query? If so, could you share the how, what and where to put me on the right path?
Thanks, I'm sure I'm just looking in the wrong place.
Shouldn't it be Jamie "Diamond"?
MB, good to see you back. I hope you've been well over the past few months!
Lockhart says...we need FnF. Don't throw the baby out with the bathwater!
Thanks Jarenawer.
Thanks. I remembered Lew trying to squirm out of the direct question, just not exactly sure how he answered it. I was wrong.
IIRC, Lew didn't say it's paid off. He stated that the UST has received more money back than it gave FnF. There is a difference.
Not trying to split hairs, just trying to be accurate.
New Fairholme Funds v USA filings 6/26/2015 at 5pm
Looks like they're going after the Deloitte and PricewaterhouseCoopers files and want to make them public.
Date Filed # Docket Text
06/26/2015 169 **SEALED** MOTION to Remove the "Protected Information" Designation from Certain Unredacted Information in Documents Produced by Deloitte , filed by All Plaintiffs.Response due by 7/13/2015. (Attachments: # 1 Appendix)(Cooper, Charles) (Entered: 06/26/2015)
06/26/2015 170 **SEALED** MOTION to Remove the "Protected Information" Designation from Certain Unredacted Information in Documents Produced by Fannie Mae , filed by All Plaintiffs.Response due by 7/13/2015. (Attachments: # 1 Appendix)(Cooper, Charles) (Entered: 06/26/2015)
06/26/2015 171 **SEALED** MOTION to Remove the "Protected Information" Designation from Certain Unredacted Information in Documents Produced by Freddie Mac , filed by All Plaintiffs.Response due by 7/13/2015. (Attachments: # 1 Appendix)(Cooper, Charles) (Entered: 06/26/2015)
06/26/2015 172 **SEALED** MOTION to Remove the "Protected Information" Designation from Certain Unredacted Information in Documents Produced by PricewaterhouseCoopers , filed by All Plaintiffs.Response due by 7/13/2015. (Attachments: # 1 Appendix)(Cooper, Charles) (Entered: 06/26/2015)
PLAINTIFFS’ PUBLIC REDACTED MOTION AND BRIEF IN SUPPORT OF MOTION
TO REMOVE THE “PROTECTED INFORMATION” DESIGNATIONS
FROM THE DEPOSITIONS OF EDWARD DEMARCO AND MARIO UGOLETTI
REDACTED VERSION
Plaintiffs Fairholme Funds, Inc., et al. (“Plaintiffs” or “Fairholme”) respectfully move,
pursuant to Paragraphs 17 and 19 of the Protective Order (“P.O.”) entered in this action (ECF
Doc. 73), for entry of an order requiring the Government to remove the “Protected Information”
designations that it has affixed to the transcript of the May 7, 2015 deposition of Edward De-
Marco (“DeMarco Deposition”) and to the May 15, 2015 deposition of Mario Ugoletti (“Ugoletti
Deposition”) (collectively, “the Depositions”). The information that is contained in these Depositions
does not satisfy the definition of “Protected Information” under the Protective Order. Keeping
this information secret, moreover, would prejudice both Plaintiffs and any other courts that
are now resolving legal challenges to which this information is relevant. At the very least, the
Court should order that the redacted version of the Depositions that Plaintiffs have prepared (the
“Redacted Depositions”) be de-designated. Finally, in the alternative, Plaintiffs respectfully
move, pursuant to Paragraph 18 of the Protective Order, for entry of an order authorizing Plaintiffs
to file the Depositions under seal in Fairholme Funds, Inc. v. The Federal Housing Finance
Agency, No. 14-5254 (D.C. Cir.),1 as well as in any other action challenging the Net Worth
Sweep at issue in this case in which Plaintiffs participate either as parties or amici, to ensure that
the courts are not presented with a misleading and incomplete factual record.
1
QUESTIONS PRESENTED
1. Does the information contained in the Depositions meet the definition of “Protected Information”
under Paragraph 2 of the Protective Order?
2. Do the Redacted Depositions prepared by Plaintiffs meet the definition of “Protected Information”
under Paragraph 2 of the Protective Order?
3. Should this Court authorize Plaintiffs to file the Depositions under seal in in Fairholme
Funds, Inc. v. The Federal Housing Finance Agency, No. 14-5254 (D.C. Cir.), and in any
other action challenging the Net Worth Sweep in which Plaintiffs participate either as
parties or amici, to ensure that the courts are not presented with a misleading and incomplete
factual record?
STATEMENT OF THE CASE
The ongoing discovery in this case is being conducted pursuant to a standard protective
order that permits a producing party to “designate as Protected Information any information, document,
or material that meets the definition of Protected Information set forth in this Protective
Order.” P.O. at 1. Protected Information is defined as “proprietary, confidential, trade secret, or
market-sensitive information, as well as information that is otherwise protected from public disclosure
under applicable law.” Id. ¶ 2. The Protective Order permits a producing party to initially
designate all information as protected solely in order to expedite production. Id.
This right to designate all information as protected initially, however, is subject to the receiving
party’s subsequent right to challenge that designation using the procedures established by
Paragraph 17 of the Order. Id. ¶ 17; see also id. ¶ 19 (“This Protective Order shall be without
prejudice to the right of any party to bring before the court at any time the question whether any
particular document or information is Protected Information or whether its use otherwise should
be restricted.”). Paragraph 17 provides that the party intending to challenge a designation must
first notify the producing party of its disagreement with its designation. Id. ¶ 17. The parties must
seek to resolve the dispute within five business days of the producing party’s receipt of such notice.
Id. After those five days,
f the dispute is not resolved, the party challenging the protected designation, upon
no fewer than three (3) business days’ written notice to the producing party may,
by specifying the basis on which it claims that such designation is not appropriate
or that such disclosure is proper, seek a ruling from the court that the information
is improperly designated or that disclosure is allowed.
Id. The burden of persuasion rests with the moving party. Id.
On Thursday, May 7, 2015, Plaintiffs took the deposition of Edward DeMarco, the government
official who served from 2009 through 2014 as the acting director of the Federal Housing
Finance Agency (“FHFA”). On Friday, May 15, 2015, Plaintiffs took the deposition of Mario
Ugoletti. Mr. Ugoletti was a Treasury official at the time that Fannie and Freddie were placed
into conservatorship and was a FHFA official at the time of the Net Worth Sweep; he worked on
matters related to the Preferred Stock Purchase Agreements (“PSPAs”) in both positions. Transcripts
of the depositions are attached hereto as Exhibits A and B. The Government designated
the entire transcripts of both depositions as Protected Information.
In accordance with the procedures set forth in Paragraph 17 of the Protective Order,
Plaintiffs’ counsel notified counsel for the Government that Plaintiffs believed that the Ugoletti
and DeMarco Depositions contained no protected information and should therefore be de-designated
in their entirety. The notifications were sent on May 22 and May 26, respectively. See Emails
between Vincent Colatriano, Counsel for Plaintiffs, and Gregg Schwind, Counsel for the
Government (Exhibits C and D). Plaintiffs also expressed their willingness, as a compromise, to
agree to the de-designation of only certain identified portions of the deposition transcripts in the
hope that the Government would reconsider its previously expressed opinion that the Protective
Order does not contemplate partial de-designation.
Counsel for the Government first responded to Fairholme’s requests for de-designation
on June 2, 2015—after the five-day period applicable under Paragraph 17 to Fairholme’s request
for de-designation of the Ugoletti Deposition had expired, and on the final day of the period applicable
to Fairholme’s request for de-designation of the DeMarco Deposition. But rather than
respond to Fairholme’s requests on their merits or otherwise seek to “try to resolve” this issue,
P.O. ¶ 17, the Government acknowledged that it had not even reviewed those requests, and it told
Fairholme that because it was busy, it would not review the requests until it had completed its
final privilege logs—a task the Government does not expect to finish until at least the end of this
month. Fairholme immediately objected to the Government’s attempt to essentially grant itself a
one-month extension of the Protective Order’s five-day deadline for the Government to review
the de-designation requests, and asked the Government to reconsider its position. See E-mail
from Vincent Colatriano to Gregg Schwind (June 3, 2015) (Exhibit E). In light of the expiration
of the five-day period contemplated by the Protective Order, and given an approaching June 30,
2015 deadline for filing opening briefs in the Court of Appeals for the D.C. Circuit, Plaintiffs’
counsel also notified the Government at that time that Plaintiffs intended to seek the Court’s resolution
of this issue.
ARGUMENT
I. THE GOVERNMENT HAS IMPROPERLY DESIGNATED THE DEPOSITIONS
AS “PROTECTED INFORMATION” AND THE COURT SHOULD ORDER THE
REMOVAL OF THESE DESIGNATIONS.
Because they contain no information that meets the Protective Order’s definition of Protected
Information, the Court should order the de-designation of the Depositions in their entirety.
1. The Federal Circuit has cautioned that “[p]arties frequently abuse Rule 26(c) by
seeking protective orders for material not covered by the rule.” In re Violation of Rule 28(D),
635 F.3d 1352, 1358 (Fed. Cir. 2011). To avoid such abuse, there must be some “demonstrati[
on] that there is good cause for restricting the disclosure of the information at issue.” Id. at
1357. Requiring that there be a demonstration of good cause before disclosure may be restricted
ensures not only that Rule 26(c) is respected, but also that the public’s First Amendment “right
of access . . . to civil trials and to their related proceedings and records” is not infringed. New
York Civil Liberties Union v. New York City Transit Auth., 684 F.3d 286, 298 (2d Cir. 2011)
(emphasis added); see also Citizens First Nat’l Bank of Princeton v. Cincinnati Ins. Co., 178
F.3d 943, 944 (7th Cir. 1999) (noting that parties “are not the only people who have a legitimate
interest in the record compiled in a legal proceeding”); Anderson v. Cryovac, Inc., 805 F.2d 1, 7
(1st Cir. 1986) (“[F]irst [A]mendment considerations cannot be ignored in reviewing discovery
protective orders.”).
This Court crafted a Protective Order with a clear and precise definition of “Protected Information”
that ensures that the mandate of the Federal Circuit is obeyed and respected. Specifically,
it defines “Protected Information” as “proprietary, confidential, trade secret, or marketsensitive
information, as well as information that is otherwise protected from public disclosure
under applicable law.” P.O. ¶ 2. “Protected Information does not include discovery material that
has been provided to or prepared by any Government agency (which shall include, for these purposes,
FHFA) and that is available under applicable law.” Id. The Order also recognizes that protected
information “may be contained in . . . any deposition, sealed testimony or argument, declaration,
or affidavit taken or provided during this litigation.” P.O. ¶ 2(b).
The Order does not permit a party to designate as protected any and all information that it
might wish to shield from public scrutiny. While the Order does permit a party to “initially designate
all information” produced as protected, P.O. ¶ 2 (emphasis added), any information designated
as protected ultimately must meet the Protective Order’s definition of protected information
in order to qualify for protection from public disclosure. The information that is contained
in the Depositions does not meet this definition and does not qualify for protection from
disclosure.
Although the Government has yet to explain why the attorneys who reviewed the Depositions
concluded that both must be shielded from public disclosure in their entirety, it is nonetheless
clear that none of the categories set forth in Paragraph 2 in fact applies. None of the information
contained in either Deposition constitutes a trade secret or could be considered proprietary
information. Nor is the information arguably market-sensitive. Indeed, the Government took
the position that the “date ranges” this Court established for document discovery also applied to
deposition testimony, and Government counsel instructed the witnesses not to answer questions
counsel deemed to fall outside those date ranges. See, e.g., Ugoletti Deposition 145:9–146:1; De-
Marco Deposition 134:4–7, 293:22–294:6, 297:3–6. The most recent of those date ranges closed
on September 30, 2012. Opinion and Order at 4 (July 16, 2014), Doc. 72. It is simply implausible
to assert that the public disclosure of nearly three-year-old information concerning Fannie’s and
Freddie’s finances would have any significant impact on the market today. There is no other law,
finally, that protects these Depositions from disclosure.
Nor does the information in these Depositions fall within any legitimate conception of
“confidential” information. In previous briefing on related issues, the Government has argued
that all that is required for information to be considered “confidential” within the meaning of the
Protective Order is that it not already be in the public domain. See Defendant’s Resp. to Plaintiffs’
Motion to Remove the “Protected Information” Designation from Defendant’s Provisional
Privilege Logs at 4 (May 18, 2015), Doc. 154. That position is untenable, as it would mean that
all meaningful discovery in this action would qualify as Protected Information; after all, there
would be no need for Fairholme to “discover” information that was already public. But in addition
to hiding all meaningful discovery behind a shroud of secrecy, the Government’s position
also fails because it relies on an interpretation of “confidential” that this Court specifically rejected.
When this Court heard argument on the parties’ competing proposals regarding the definition
of Protected Information, it made clear that the mere fact that a document had not been previously
released to the public did not suffice to render that document “confidential.” See, e.g.,
Transcript of July 16, 2014 Status Conference at 10:23–11:23, Doc. 75 (Exhibit F). The Court
should now reject any attempt, therefore, to interpret the Protective Order in a way that converts
the process of discovery into an exercise in concealment.
Rather, for information to be considered “confidential” within the meaning of the order,
the public release of that information must be likely to cause some type of legally cognizable
harm to the producing party or to third parties. Id.; see also In re Violation of Rule 28(D), 635
F.3d at 1357–58 (“[T]he party seeking to limit the disclosure of discovery materials must show
that specific prejudice or harm will result if no protective order is granted.” (quotation marks
omitted)); Lakeland Partners, LLC v. United States, 88 Fed. Cl. 124, 133 (2009) (party seeking
to limit discovery or seeking other protections under Rule 26(c) “must make a particularized factual
showing of the harm that would be sustained if the court did not grant a protective order”).
Plaintiffs have been unable to identify any legitimate reason why the information contained in
the Depositions meets this standard for protection, and the Government has offered none.3
2. The fact that the Depositions contain no Protected Information conclusively ends
the relevant analysis under the Protective Order. Because the Depositions contain no Protected
Information, the Government cannot continue to insist that they be treated as though they do.
The Court should be aware nonetheless that the Government’s refusal to remove the “Protected
Information” designation from these Depositions would also prejudice Plaintiffs and the public,
and potentially restrict the access of the courts to relevant evidence.
As an initial matter, disclosure of the Depositions would promote Plaintiffs’ interest in
being able to develop and present their case in a way that is informed and supported by the views
and judgments of their clients as well as scholars, experts, and the public debate about the Government’s
treatment of Fannie and Freddie. See Plaintiffs’ Public, Redacted Motion to Remove
the “Protected Information” Designation from Defendant’s March 20 Privilege Log at 11–13
(May 12, 2015), Doc. 152; Plaintiffs’ Reply in Support of their Motion to Remove the “Protected
Information” Designation from Defendant’s March 20 Privilege Log at 12–14 (May 27, 2015),
Doc. 155. This is particularly important in a case involving issues related to corporate finance
and other complex and specialized subjects.
Furthermore, Plaintiffs are prejudiced by the fact that, as things currently stand, they cannot
use the information in the Depositions in their case challenging the Net Worth Sweep in the
D.C. Circuit (or in any other case in which they may participate in the future, for that matter). As
explained below, this prejudice is particularly acute because Mr. Ugoletti’s testimony calls into
question evidence submitted by FHFA in the district court.
II. THE REDACTED DEPOSITIONS PREPARED BY PLAINTIFFS CONTAIN NO
PROTECTED INFORMATION AND SHOULD BE DE-DESIGNATED.
Although the Depositions should be de-designated in their entirety, Plaintiffs nevertheless
offered to agree to the release of redacted versions of these transcripts that would reveal only
those portions of the Depositions that they believe both are most relevant to certain issues relating
to their challenge to the Net Worth Sweep, and do not raise any even arguable questions regarding
confidentiality. Plaintiffs seek to remove the protected information designation from a
total of 1,264 of 16,123 lines of transcription, an alternative that would result in less than 8% of
these depositions being disclosed. Plaintiffs offered this proposal to keep over 90% of the depositions
confidential in the spirit of compromise, seeking to minimize whatever harm (and we are
not aware of any) that the Government could claim would result from the public release of the
information.
Plaintiffs have provided the Government with a version of the Deposition transcripts,
copies of which are attached hereto as Exhibits G and H, in which they highlighted a selection of
passages for de-designation. The passages in the Ugoletti Deposition address, among other
things, the need for HERA to restore confidence in the GSEs, Ugoletti Deposition 40:18–41:2;
the process of drafting the PSPA in August and September of 2008, id. at 46:4–12; Mr. Ugoletti’s
involvement in that process on behalf of Treasury, id. at 47:22–49:18; the payment-in-kind
provisions under the PSPA, id. at 52:1–14, 54:14–55:3, 58:2–14; the projections upon which
FHFA relied when considering the Net Worth Sweep, id. at 93:22–94:4; alternatives considered
to the Net Worth Sweep, id. at 129:9–21, 149:8–17; the negotiation of the Net Worth Sweep, id.
at 150:15–151:3, 154–158; and capital requirements and GSE safety and soundness, id. at
161:12-20, 164:8–166:5. Those passages that Plaintiffs have highlighted in the DeMarco Deposition
concern primarily the financial data and income projections upon which FHFA and Treasury
relied when they enacted the Third Amendment to the PSPAs, see, e.g., DeMarco Deposition
163, 269–270, 308, and the government’s long-term plans for the conservatorship, see, e.g., id. at
193–95.
These specific passages, like the Deposition as a whole, contain no “Protected Information.”
And as discussed in greater detail in the next section of this brief, these passages are not
only of unquestionable relevance to the resolution of the issues raised by the Government’s publicly-
filed motion to dismiss in this case, they also raise serious concerns regarding justifications
for the Net Worth Sweep made by the Government in its public filings in the Fairholme litigation
now pending in the D.C. Circuit.
III. IN THE ALTERNATIVE, THE COURT SHOULD PERMIT PLAINTIFFS TO
FILE THE DEPOSITIONS UNDER SEAL IN FAIRHOLME FUNDS, INC. V. THE
FEDERAL HOUSING AGENCY.
Finally, should the Court conclude—in error, Plaintiffs respectfully submit—that both
the Depositions and the Redacted Depositions prepared by Plaintiffs contain Protected Information,
Plaintiffs respectfully request that the Court permit the filing of the Depositions under
seal in the Fairholme litigation in the D.C. Circuit. The Protective Order permits the Court to authorize
a party “to file Protected Information in litigation other than the subject action identified
in Paragraph 3.” P.O. ¶ 18. This information would be filed under seal. Id. (“Unless the parties
otherwise agree or this court otherwise orders, any such Protected Information that is filed in
other litigation must be filed under seal.”). The opening briefs in the D.C. Circuit are due on June
30, 2015. See supra note 1.
The DeMarco and Ugoletti Depositions contain information that is relevant to Plaintiffs’
pending appeal in the D.C. Circuit. For example, what the Government knew about Fannie’s and
Freddie’s future profitability at the time of the Net Worth Sweep is at issue in both this case and
in the D.C. Circuit, for the Government’s “death spiral” rationale for the Net Worth Sweep is undermined
if the Government knew that Fannie and Freddie would soon generate earnings exceeding
Treasury’s 10% dividend by tens of billions of dollars.
A significant portion of these tens of billions of dollars in earnings were generated by the
reversals of the Companies’ deferred tax assets valuation allowances in 2013. FHFA submitted a
declaration signed by Mr. Ugoletti in the district court asserting that
[N]either the Conservator nor Treasury envisioned at the time of the Third Amendment
that Fannie Mae’s valuation allowance on its deferred tax assets would be
reversed in early 2013, resulting in a sudden and substantial increase in Fannie
Mae’s net worth, which was paid to Treasury in mid-2013 by virtue of the net worth
dividend.
Declaration of Mario Ugoletti ¶ 20, Perry Capital LLC v. Lew, No. 13-1025 (D.D.C. Dec. 17,
2013), ECF No. 24-2. This assertion followed and supported Mr. Ugoletti’s claim that “the intention
of the Third Amendment was not to increase compensation to Treasury,” id. ¶ 19—a point
FHFA emphasized in its briefing. See, e.g., FHFA Motion to Dismiss All Claims at 18, Perry
Capital LLC v. Lew, No. 13-1025 (D.D.C. Jan. 17, 2014), ECF No. 28; FHFA Reply in Support
of Motion to Dismiss at 53, Perry Capital LLC v. Lew, No. 13-1025 (D.D.C. May 2, 2014), ECF
No. 45. (9 redacted lines here)
That Declaration was not filed under seal, nor is it
subject to a Protective Order. To permit the Government to withhold from the D.C. Circuit the
information that it has provided in this action would be to permit the Government to provide different
facts to different courts, violating the principle that courts must “protect the integrity of the
judicial process” and “prevent improper use of judicial machinery.” New Hampshire v. Maine,
532 U.S. 742, 749, 750 (2001) (quotation marks omitted).
A Protective Order should shield sensitive information from the public, not conceal facts
from the courts. Paragraph 18 of the Protective Order accordingly permits this Court to authorize
a party to file information with another court under seal. Should the Court conclude that any of
the information contained in the Depositions should be protected from disclosure, therefore, the
proper course under the Protective Order would be to permit its use in other judicial proceedings,
but require that it be filed in those proceedings under seal.
CONCLUSION
For the foregoing reasons, Plaintiffs respectfully request that the Court enter an order requiring
that the Government remove the “Protected Information” designation from the Ugoletti
and DeMarco Depositions. If the Court does not believe such relief is appropriate, then Plaintiffs
respectfully request that the Court order the “Protected Information” designation removed from
those specific portions of the Depositions that Plaintiffs have identified in Exhibits G and H. Finally,
in the alternative, Plaintiffs respectfully request that this Court exercise its power under
Paragraph 18 of the Protective Order and authorize the filing of the Depositions under seal in the
Fairholme Funds, Inc. v. The Federal Housing Finance Agency D.C. Circuit litigation, and in
any other action challenging the Net Worth Sweep in which Plaintiffs are participating either as
parties or amici, to ensure that the courts are not presented with a misleading and incomplete factual
record.
Date: June 12, 2015 Respectfully submitted,
Of counsel:
Vincent J. Colatriano
David H. Thompson
Peter A. Patterson
Brian W. Barnes
COOPER & KIRK, PLLC
1523 New Hampshire Avenue, N.W.
Washington, D.C. 20036
(202) 220-9600
(202) 220-9601 (fax)
s/ Charles J. Cooper
Charles J. Cooper
Counsel of Record
COOPER & KIRK, PLLC
1523 New Hampshire Avenue, N.W.
Washington, D.C. 20036
(202) 220-9600
(202) 220-9601 (fax)
ccooper@cooperkirk.com
Not sure, as most everything recently is under seal, but there's a new filing by the Fairholme lawyers just in the last few hours. It's doc. # 168 (52 pages) and titled...
PLAINTIFFS’ PUBLIC REDACTED MOTION AND BRIEF IN SUPPORT OF MOTION
TO REMOVE THE “PROTECTED INFORMATION” DESIGNATIONS
FROM THE DEPOSITIONS OF EDWARD DEMARCO AND MARIO UGOLETTI
____________________________________________
CONCLUSION
For the foregoing reasons, Plaintiffs respectfully request that the Court enter an order requiring
that the Government remove the “Protected Information” designation from the Ugoletti
and DeMarco Depositions. If the Court does not believe such relief is appropriate, then Plaintiffs
respectfully request that the Court order the “Protected Information” designation removed from
those specific portions of the Depositions that Plaintiffs have identified in Exhibits G and H. Finally,
in the alternative, Plaintiffs respectfully request that this Court exercise its power under
Paragraph 18 of the Protective Order and authorize the filing of the Depositions under seal in the
Fairholme Funds, Inc. v. The Federal Housing Finance Agency D.C. Circuit litigation, and in
any other action challenging the Net Worth Sweep in which Plaintiffs are participating either as
parties or amici, to ensure that the courts are not presented with a misleading and incomplete factual
record.
I haven't read it all yet.
Thanks for posting Dollars. Just more pasta on the wall...
**SEALED** MOTION to Remove the "Protected Information" Designation from Certain Treasury and FHFA Documents , filed by All Plaintiffs. Response due by 7/13/2015. (Attachments: # 1 Appendix)(Cooper, Charles) (Entered: 06/24/2015)
06/24/2015 5pm doc. #166
The three-card Monte accounting of Fannie, Freddie conservatorship...
The three-card Monte accounting of Fannie, Freddie conservatorship
Admittedly partisan study raises troubling questions
June 23, 2015 Trey Garrison
A forensic look at the complex legerdemain that was federal government putting the GSEs in conservatorship reveals some head-scratching accounting and some three-card Monte-style mathematics.
Serving as a guide in all this is a new report that, admittedly, comes from a source with skin in the game. But they’re willing to put their names and professional reputations to it, and if whole and accurate, is pretty damning for the Treasury Department.
The full 27-page report, which can be read here, is from two activist investors involved in the FannieGate controversy with extensive legal and business backgrounds, Adam Spittler CPA, MS and Mike Ciklin JD, MBA, MRE.
Here’s what they say they've found.
For starters, they say, Treasury justified the conservatorship of the GSEs via accounting gimmicks since they faced no liquidity issue at the time of the crisis and recession. They note that Fannie Mae’s Cash Net Income, adjusted for non-cash items, was positive throughout entire crisis and recession.
In the third quarter of 2008, the financials should have looked like an abattoir floor. But it didn’t.
Accounting net loss for the quarter was $29b. Loan loss reserve for the quarter was $8.7b and FHFA forced Fannie to write off $21.4b of Deferred Tax Asset.[1]
The manufactured $29b loss “wow” factor was an attempt to overcompensate for the shaky legal justification for the conservatorship.
Deduct the two massive - and unnecessary as proven in later years - non cash expenses of $21.4b and $8.7b, Fannie’s Cash Net Income = 1.1b. Fannie, in the quarter it was taken into conservatorship, generated $1.1b of cash.
Okay, you say, but what about liquidity?
Fannie Mae disclosed they held $36.3 billion cash in the bank on September 30, 2008 with a maximum exposure of roughly $6 billion per quarter. That was enough liquidity to survive over 18 months, assuming it didn’t bring in another dime.
Then there’s the Treasury Draw Trigger.
Treasury Draw Trigger = “Net Assets” instead of cash, or fair market value, or even current or quick ratio. Why?
Net Assets is by far the easiest measure to manipulate. With it, Treasury can push reserves onto the balance sheet to impair assets while liabilities remain untouched. In effect, it gives Treasury the power to force the GSE’s to take funding via aggressive reserve assumptions. If Treasury had picked a true cash or liquidity measure to serve as the draw trigger, none of the draws would ever have been required.
All of which leads to a number of questions the report poses.
Q: “What company requires 116b [sic] of a bailout but then pays it back in full within a 2 year period of ‘returning; to profitability?”
A: "One that non-cash based accounting gimmicks made it seem like it needed in the first place; in terms of operations and cash, it needed nothing."
In other words, these accounting gimmicks would made it seem that HERA conservatorship criteria had been met, but it looks like, if the authors are right, none of them were.
In fact, they argue quite compellingly that the Treasury could have provided GSEs with line of credit and they never would have had to borrow a penny.
President Bush despised the GSEs (as did HP & TG) and they wanted GSE balance sheets to help TBTF banks and support housing.
Federal Accounting Standards Advisory Board (FASAB) Meeting held from December 17-18 2008 [2]
Treasury’s Deputy CFO, Director of Accounting, and a rep from the Office of the Inspector General all appeared. No one from FHFA.
Then they offer this bombshell – the GSE bailout number of $200 billion “was not an accounting estimate…figure developed from a public policy perspective… not developed based on any type of analysis of future (i.e. cash flow) needs.”
Buried in Fannie’s 2009 10k was this:
“On April 1, 2009, we adopted (management [Treasury/FHFA] elected) the FASB modified standard on the model for assessing other-than-temporary impairments, applicable to existing and new debt securities held by us as of April 1, 2009.”
Prior accounting (Q1 09 and before) provided for exclusion of a reserve if the Enterprise intended to hold the security until it recovered.
The capital markets retained portfolio of Fannie Mae on December 31, 2008 was $765.1 billion. (Not a typo. Three-quarters of a trillion dollars.)
The US Treasury has required Fannie Mae to liquidate 100% of its retained portfolio by 2018.
By changing this accounting method, Treasury created an unbelievably powerful mechanism to mercilessly write down the retained portfolio. Treasury, racing to the scene, then forces the GSEs to draw down funds to repair the phantom accounting damage it engineered.
Then there’s this.
“Within 15 business days following the determination of the deficiency amount, if any, as of the end of each fiscal quarter of Seller which ends on or before the Liquidation End Date….Purchaser shall provide such funds within 60 days of its receipt of such request.”
Ponder that one.
The quarter end close in a normal company takes about three weeks, right?
At day 21, the GSEs are able to determine if there is a deficiency (negative net assets). At which point they have 15 days to request funds. At this point, they are 5 weeks into the process, paying payables every single day.
Then, Treasury has a full 60 days or 8 and a half weeks to fund. At this point, the Bailout Funds are now available 13 ½ weeks after the date of determination for the supposed cash needs.
If, the authors argue, the GSEs were on the verge of diabetic coma and they needed their insulin from Treasury, they’d be stone cold dead.
So how did Fannie or Freddie keep operations going while they were supposedly insolvent?
The answer is simple: they were never insolvent…the smoke and mirrors of accounting reserves were used to make them appear that way.
Loan loss and FMV reserves were materially overstated in 2008 and 2009 then reversed in 2013 and beyond.
Rep and Warrant accounting was incorrect. Never recorded any receivable from the banks, only impaired the defaulted loan
If everything in the whole report – and I urge you to look the full thing, with its extensive research and footnoting – then there’s an amazing amount of gymnastics you have to go through to get to where the Treasury stands today.
The Deferred Tax Asset Reserve should have never been booked in the first place. Using the uncertainty of conservatorship as a reason to impair while ignoring the previous 18 years of profitability is unreasonable and incorrect. On the flip side, ignoring the uncertainty of conservatorship in 2013 to reverse the reserve is cherry picking and also incorrect.
What they’re saying – and I can’t find a good counterargument otherwise – is that the Treasury can’t use the argument to its advantage on the front end and ignore its existence on the back end.
Deloitte knew or should have known better…and they should be on the hook for the cost of a full restatement. In addition, all non-cash inflated reserves that were historically unnecessary must be reversed and pushed back into Net Income. Deloitte simply has no margin for error based on Treasury’s imposed “Net Asset” trigger for borrowing funds.
R&W estimate was $50b, 41.5b above settlements to date, yet another back door bailout of banks]
Click to enlarge
None of it adds up, and someone isn’t being candid or straight.
[1] To put this into perspective, the FHFA basically said that in spite of 80 years of profitability, after controlling the operations of Fannie Mae for exactly 23 days, we feel that it will never, ever, return to profitability (ever) and therefore the tax benefit will not be realized.
[2] FASAB “serves the public interest by improving federal financial reporting…essential for public accountability”
Obit, you sir, are a gentleman and scholar. I always appreciate your succinct and intelligent input.
Cmdr, thanks for tweeting Charlie.
Today's action was mostly traders/flippers. The real move will come when the big players are able to unpack Wheeler's Opinion and apply it to FnF cases. Ack & Berk have a bunch of friends on the sidelines waiting for the right signals to make their move. This could be it. Look for large accumulation/volume over multiple weeks when they are ready imo.
While I agree. How did Charlie ever get a gig discussing complex business dealings on the air? The guy is the least coherent analyst/commentator I've ever seen. Sounds punch drunk to me! lol
Obit, when you have the time, I would certainly like to hear your thoughts of Judge Wheeler's Opinion and Order for the Starr case today as it relates to FnF. If you care to unpack it that is?
TIA
$2.65 gone, gone, gone,....
Someone needs to tweet Fox Business Charlie Gasparino before he comes on the air today and make sure he understands that FnF shareholders aren't looking for damages, so this win for Starr should mean a big win for FnF shareholders. Don't let him say because no damages were awarded then FnF stock shouldn't go up...as I can see him doing! Write the script for him...."FnF share should hit $10+"....
Starr Opinion and Order by Wheeler. Hvpatel if you do a query on pacer for Starr and today's date you will see the doc. 75 pages, no charge for opinions. I'm reading it know.
Conclusion
Based upon the foregoing, the Court concludes that the Credit Agreement
Shareholder Class shall prevail on liability due to the Government’s illegal exaction, but
shall recover zero damages, and that the Reverse Stock Split Shareholder Class shall not
prevail on liability or damages. The Clerk is directed to issue final judgment consistent
with this opinion.
No Joint Status Conference needed on June 17....
IN THE UNITED STATES COURT OF FEDERAL CLAIMS
FAIRHOLME FUNDS, INC., et al., Plaintiffs, v. THE UNITED STATES, Defendant.
No. 13-465C...Judge Sweeney
JOINT STATUS REPORT REGARDING JUNE 17 STATUS CONFERENCE
In accordance with this Court’s Order of August 13, 2014 (Doc. 85), the parties hereby notify the Court that they do not believe it is necessary to hold the status conference currently scheduled for June 17.
Case 1:13-cv-00465-MMS Document 163 Filed 06/15/15 (9:45am) Page 1 of 1
While I agree with your post, I would like to add some additional thoughts.
The Starr (AIG) case is challenging on two separate grounds.
1. illegal exaction (unlike FNMA), which is based on a law/practice that states the Gov't had no authority to own AIG stock at any point and...
2. a takings (like FNMA).
Based on the court filings it appears Starr likes it's chances better for a win due to an illegal exaction and if so, this would have no legal effect on the FNMA cases. If Starr wins based the taking claim (or both and even if the judge awards zero/small damages) then it helps us tremendously imo. It helps set precedent for a takings....not to mention what you state, the Third Amendment is way more egregious than what the Gov't did to AIG.
It's a motion to remove the "Protected Information" designations from the depositions that the plaintiffs (Fairholmes lawyers) are doing. But because it's about protected information, I'm guessing it has to be sealed for now. My guess is it's probably because of the Ugoletti depo. I believe his previous statements are a key part of proving Fairholmes case and they want what he says in his depo made public maybe so he can't contradict public statements he has previously made. Anyway, they are requesting a response from the govt. by 6/29 and then Sweeney will decide I believe.
Mario Ugoletti
Mario Ugoletti is the Interim Ombudsman for FHFA and reports directly to the Director of FHFA. He assumed his role in July 2014 and is responsible for considering complaints and appeals from any regulated entity, the Office of Finance, or any person who has a business relationship with a regulated entity or the Office of Finance concerning any matter relating to FHFA’s regulation and supervision.
Prior to joining the FHFA, Ugoletti spent 14 years at the Treasury Department and served as Director of the Office of Financial Institutions Policy from 2004 to 2009. Ugoletti has a Ph.D. in Economics from Penn State University. Mr.Ugoletti has served as a Special Advisor to the Acting Director of the FHFA since 2009 and has been appointed by Mr. Watt as Special Advisor – Agency (in addition to acting as Interim Ombudsman.) read less
The Office of Ombudsman is responsible for considering complaints and appeals from any regulated entity, the Office of Finance, or any person who has a business relationship with a regulated entity or the Office of Finance concerning any matter relating to FHFA’s regulation and supervision. Created by regulation under HERA, the office commenced operation in March 2011.