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Real game begins tmrw, are you as excited as I am? Finally we have our day in court…..against all odds…..
A jury of 10 will decide the @FannieMae and @FreddieMac shareholder lawsuit against the @FHFA. Opening arguments will begin tomorrow morning.
— Katie Buehler (@bykatiebuehler) October 17, 2022
Thanks for the updates Robert. Looking forward to hear more tmrw when real trial starts.
Thus, petitioners identified property that they owned, and that the Treasury acquired through the Net Worth Sweep. That establishes petitioners’ standing to bring a claim under the Takings Clause. Yet the Federal Circuit and the Court of Federal Claims held petitioners had no right to bring a direct claim because their only possible claim was a derivative claim on behalf of the companies; both courts reached this conclusion without spending any time analyzing whether petitioners had identified a property right that they owned and that was taken. App.550a–55a; App.21a–28a.
The only place where the Federal Circuit obliquely recognized that petitioners owned a property right was in distinguishing the D.C. Circuit’s holding in Perry II that shareholders have an “obviously direct” claim for the
23
breach of their shareholder contracts. Perry II, 864 F.3d at 628. The Federal Circuit rejected petitioners’ argument that their ability to vindicate their property rights should be just as “obviously direct” as their ability to vindicate their contractual rights, holding as follows:
The fact that shareholders possess a property interest in their shares of the Enterprises does not answer the question of whether they are asserting direct or indirect harm to that property right. Shareholders clearly allege a corporate overpayment by the Enterprises which, in turn, indirectly diluted the value of their shares.
App.26a.
This mischaracterizes petitioners’ claims. First, the Net Worth Sweep did not “indirectly dilute the value” of petitioners’ property rights; it nullified them in their entirety, and transferred their value to the Treasury. Before the Net Worth Sweep, petitioners held rights that had value because of the potential for future dividends – in particular, they would have considerable value when and if the Treasury ever sought to receive dividends in excess of their 10% senior preferred dividend. After the Net Worth Sweep, petitioners had no rights – zero. No matter how much money the GSEs might make, 100% of it must go to Treasury. This government action did not “indirectly dilute the value” of petitioners’ property; it effected a total deprivation of 100% of the value of petitioners’ property, and thus was a categorical taking under this Court’s decision in Lucas v. South Carolina Coastal Comm’n, 505 U.S. 1003 (1992).
The defendant should not be permitted to defend the dismissal of petitioners’ multi-billion dollar Takings claim based upon a partially reasoned footnote attached to text that dramatically shrinks the protections of the Takings Clause.
Page 36
In Lamberth court there was a last minute video conference held on Friday at 3:30pm with 34m notice.
I believe settlement very likely when they are forces to see those secret docs by jury bcoz Lamberth is trying his best to give plaintiffs what ever they to prove thier case. Buckle up guys, next two weeks has that potential upside that we have been waiting for so many days.
INSTRUCTION NO. 3 Statement of the Case
This is a class action brought by plaintiffs Joseph Cacciapalle, Michelle M. Miller, Timothy J. Cassell, and Barry P. Borodkin on behalf of the common and preferred shareholders of the Federal Home Loan Mortgage Corporation, normally called Freddie Mac, and the common shareholders of the Federal National Mortgage Association, normally called Fannie Mae. I will explain in more detail later what a class action is.
Does this mean Fannie common also included?
https://www.reuters.com/legal/jury-begins-third-day-deliberations-alex-jones-sandy-hook-defamation-trial-2022-10-12/
Families were asking $550M the jury awarded $965M so there is no fixed limit of $14-$17 for jury
He fined govt $285k back then, here its taking of $150B without compensation to other property owners. Go figure what he will say…..
Sleepless nights next two weeks for fellow travelers until jury’s verdict is released along with Lamberth’s strong words, like below, for their conduct. Salt the ground so it never grows back. Dancing on the graves of shareholders, so far, but Lamberth about to stop their music. Bring it. Game On.
Judge Lamberth has never been afraid to come under fire for what he thought was right.
A sense of integrity—of maintaining consistent beliefs and conforming words and actions to them, of following through on commitments, and of refusing to compromise certain core principles—has been apparent throughout Lamberth’s career.
Lamberth “believes every person—whether it’s the president of the United States or an administra- tive clerk—has a duty to serve the American people and do their duty as required under the law.”
The judge said Mr. Magaziner and the Clinton Administration had been ''dishonest''
In the ruling today, the climax of five years of litigation between doctors and the Clinton Administration, Judge Royce C. Lamberth of Federal District Court said: ''It is clear that the decisions here were made at the highest levels of Government, and the Government itself is -- and should be -- accountable when its officials run amok. There were no rogue lawyers here misleading this court.''
Rather, Judge Lamberth said, ''the executive branch of the Government, working in tandem, was dishonest with this court, and the Government must now face the consequences of its misconduct.''
Judge Lamberth said ''the Department of Justice succumbed to pressure from White House attorneys'' and ''never corrected any of the factual inaccuracies'' in Mr. Magaziner's sworn statements to the court.
''The most outrageous conduct by the Government in this case is what happened when it never corrected or updated the Magaziner declaration,'' the judge said, and he added:
''It seems that some Government officials never learn that the cover-up can be worse than the underlying conduct. Most shocking to this court, and deeply disappointing, is that the Department of Justice would participate in such conduct.''
After concluding that the Administration had acted in bad faith, Judge Lamberth declared, ''This type of conduct is reprehensible, and the Government must be held accountable for it.''
Prof. Bala Dharan* (Berkley Research Group, LLC, 99 High Street, 27th Floor, Boston, MA 02110)
Prof. Bala Dharan is an expert witness retained by Plaintiffs to provide an analysis of whether the Net Worth Sweep (1) was reasonably necessary to avoid insolvency or other significant financial harm to Fannie Mae and Freddie Mac at the time of the Third Amendment, or (2) otherwise advanced, or was consistent with, FHFA’s stated purpose of restoring Fannie Mae and Freddie Mac to a sound and solvent financial condition. Prof. Dharan will testify regarding these topics and his economic and historical analysis supporting his conclusions that:
i. The Net Worth Sweep could not reasonably have been viewed as necessary to avoid insolvency or other significant financial harm to Fannie Mae and Freddie Mac at the time of the Third Amendment;
ii. The Net Worth Sweep could not reasonably have been understood as advancing the purpose of restoring Fannie Mae and Freddie Mac to a sound and solvent financial condition;
iii. The Net Worth Sweep could only reasonably have been viewed as a means to transfer value from shareholders to Treasury and to financially weaken Fannie Mae and Freddie Mac;
iv. The full restoration of the value of the deferred tax assets (“DTAs”) by Fannie Mae and Freddie Mac in their respective balance sheets so shortly after the Net Worth Sweep further makes clear that the Net Worth Sweep was unnecessary; and
v. The restoration of the DTAs vastly increased Fannie Mae’s and Freddie Mac’s net worth and further foreclosed any risk of insolvency or a circular draw. Fannie Mae and Freddie Mac had evaluated the restoration of the DTAs prior to the Net Worth Sweep, and even the possibility that the DTAs might be restored undermines any suggestion that the Net Worth Sweep was justified.
Prof. Dharan’s direct testimony should last approximately three hours.
Treasury and FHFA Affirmatively Mislead the Public and Federal Judge Royce Lamberth
After the Third Amendment went into effect and litigation ensued, FHFA submitted a sworn declaration by Mario Ugoletti to the D.C. District Court stating that “the intention of the [Net Worth Sweep] was not to increase compensation to Treasury.” However, a Treasury document dated August 16, 2012 – the day before the Net Worth Sweep was announced – lists the Companies’ “improving operating performance” and “potential for near-term earnings to exceed the 10% dividend” among the reasons for promptly adopting the Net Worth Sweep.xvii That same document reveals Treasury anticipated robust profits from both Fannie Mae and Freddie Mac for the foreseeable future, and was therefore “putting in place a better deal for taxpayers.”
The unsealed documents also show that Treasury and FHFA understood that by mid- 2012 the Companies had returned to sustained profitability, separate and apart from their substantial deferred tax assets and loan loss reserves. Minutes emailed among senior FHFA officials from Fannie’s July 9, 2012, executive management meeting indicate that Fannie’s Treasurer “referred to the next 8 years as likely to be ‘the golden years of GSE earnings.’ ”xviii
During her deposition, Fannie’s Chief Financial Officer Susan McFarland said that she “did not think that Fannie Mae was in a death spiral in mid-August of 2012” that would have prevented it from paying Treasury’s 10% cash dividend.xix In April 2012, Treasury Under Secretary for Domestic Finance Mary Miller told Secretary Geithner that she had met with officials from the Capital Group in Los Angeles (a financial services company that manages the American Funds) who “indicated that it had done a fair amount of work analyzing the sufficiency of the PSPAs and thought that they provided ‘adequate protection’ for investors.”xx Fannie Mae’s Chief Executive Officer Timothy Mayopoulos maintained a similar viewpoint and at an August 6, 2012, executive management meeting, stated that Goldman Sachs had “confirmed that foreign investors seem to have little concern regarding the PSPA’s upcoming expiration date.”xxi On August 7, 2012, a Treasury official observed that “home price, delinquency and refi trends” at the GSEs were “all very positive.”xxii
On Saturday, August 18, 2012, the day after the “Net Worth Sweep” was announced, Jim Parrott, a senior White House official serving on the National Economic Council who was intimately involved in devising and implementing the Net Worth Sweep, sent an email with the subject “Great Job” to Under Secretary of Domestic Finance Mary Miller and other Treasury officials. This e-mail, and others recently unsealed, make it clear that FHFA was not acting as an independent agency under HERA’s reuuirement that: “When acting as conservator or receiver, the Agency shall not be subject to the direction or supervision of any other agency of the United States or any State in the exercise of the rights, powers, and privileges of the Agency.”v The email states: “You guys did a remarkable job on the PSPAs this week. You delivered on a policy change of enormous importance that’s actually being recognized as such by the outside world (or the reasonable parts anyway), and as a credit to the Secretary and the President. It was a very high risk exercise, which could have gone sideways on us any number of ways, but it didn't – great great work.”vi
Another internal e-mail from Mario Ugoletti (former Senior Advisor to the Director at FHFA, and previously a senior official at Treasury), clearly shows that Treasury – not FHFA – was clearly calling the shots:
“Close Hold: As a heads up, there appears to be a renewed push to move forward on PSPA amendments. I have not seen the proposed documents yet, but my understanding is that largely the same as previous versions we had reviewed in terms of net income sweep, eliminating the commitment fee, faster portfolio wind down, and a de minimis safe harbor for ordinary course transactions.”vii
Of course, this is simply confirmation of that which former Treasury Secretary Hank Paulson articulated in his 2010 book On the Brink: “FHFA had been balky all along. That was a big problem because only FHFA had the statutory power to put Fannie and Freddie into conservatorship. We had to convince its people that this was the right thing to do, while making sure to let them feel they were still in charge.”viii
In what appears to be his first action on the day that the Net Worth Sweep was announced, Mr. Parrott emailed Peter Wallison of the conservative think tank American Enterprise Institute to give him a “heads up” and coordinate messages. The email states: “Hey guys. If you’re interested, be glad to talk you through the changes we’re announcing on pspas today. Feel like fellow travelers at this point so I owe it to you. Just let me know and suggest a few times. I’m also looping in Tim [Bowler], who runs the capital markets show over at [Treasury] and is more adept at the mechanics should we want to go there.”ix
Later that day, in a separate email, Mr. Parrott states that Wallison’s comments to Bloomberg News about the Net Worth Sweep were “exactly right on substance and intent.”x The comments to which Mr. Parrott appears to refer are Mr. Wallison in a Bloomberg News article: “The most significant issue here is whether Fannie and Freddie will come back to life because their profits will enable them to re-capitalize themselves and then it will look as though it is feasible for them to return as private companies backed by the government . . . What the Treasury Department seems to be doing here, and I think it’s a really good idea, is to deprive them of all their capital so that doesn’t happen.”xi In other emails sent around the same time, Parrott said that under the Net Worth Sweep, the “Dividend is variable, set at whatever profit for quarter is, eliminating ability to pay down principal (so they can’t repay their debt and escape as it were).”xii Parrott also indicated that the aim of the Net Worth Sweep was “ensuring that [the Companies] can’t recapitalize” by “clos[ing] off the possibility that they ever go ... private again.”xiii
In yet another email exchange, Parrott notes that “all the investors will get this very quickly” in response to a message from Mary Goodman, a managing director at James Caird Asset Management (and a former Senior Advisor to Treasury Secretary Tim Geithner who later served as Special Assistant to the President for Financial Markets at the National Economic Council), who stated that the Net Worth Sweep “should lay to rest permanently the idea that the outstanding privately held pref will ever get turned back on.”xiv
Consistent with Parrott’s statements, in a deposition transcript released last week, Fannie’s Chief Financial Officer Susan McFarland testified that she “didn’t believe that Treasury would be too fond of a significant amount of capital buildup inside the enterprises.”xv Indeed, a February 2012 Treasury document on housing finance reform proved her correct, as it reveals that Treasury’s actions were premeditated and motivated by a desire to “restructure the PSPAs to allow for variable dividend payment based on net worth” as a transition step towards winding down the Companies.xvi The day before the announcement of the Third Amendment, an internal Treasury document makes clear that the Administration’s goal was tied to its willingness to violate HERA and “desire to wind down the GSEs as quickly as possible ... by taking all of their profits going forward, we are making clear that the GSEs will not ever be allowed to return to profitable entities at the center of our housing finance system.”
All this sounds great to me:
It is further ORDERED that Defendants’ Motion in Limine [178] to Exclude Evidence of Treasury or White House Intent Not Communicated to FHFA is DENIED.
It is further ORDERED that Defendants’ Motion in Limine [206] to Compel One Appearance of Defendants’ Fact Witness Edward DeMarco is DENIED as untimely.
It is hereby ORDERED that Defendants’ Motion in Limine [154] to Exclude the Testimony of Dr. Bala Dharan is DENIED.
It is further ORDERED that Defendants’ Motion in Limine [155] to Exclude the Testimony of Dr. Joseph Mason is GRANTED insofar as Dr. Mason may not testify about his DCF analysis, his rescission calculations, or his newly stated opinion that the appropriate measure of lost share value is 100 percent of that value on the day before the Net Worth Sweep.
Defendants will be precluded from offering evidence or arguments regarding when plaintiffs purchased their shares, with the understanding that the same ruling applies to plaintiffs.
OMNIBUS PRETRIAL ORDER ON MOTIONS IN LIMINE
For the reasons stated in the accompanying Memorandum Opinion:
It is hereby ORDERED that Defendants’ Motion in Limine [154] to Exclude the Testimony of Dr. Bala Dharan is DENIED.
It is further ORDERED that Defendants’ Motion in Limine [155] to Exclude the Testimony of Dr. Joseph Mason is GRANTED insofar as Dr. Mason may not testify about his DCF analysis, his rescission calculations, or his newly stated opinion that the appropriate measure of lost share value is 100 percent of that value on the day before the Net Worth Sweep.
It is further ORDERED that Plaintiffs’ Motion in Limine [156] to Exclude the Testimony of Dr. Mukarram Attari is DENIED with respect to the bond yield event study and GRANTED with respect to the hypothetical setting of the PCF.
It is further ORDERED that Plaintiffs’ Motion in Limine [157] to Exclude the Testimony of Professor S.P. Kothari is DENIED.
It is further ORDERED that Plaintiffs’ Motion in Limine [169] to Admit Evidence Pursuant to Federal Rules of Evidence 801 and 803 is DENIED.
It is further ORDERED that Plaintiffs’ Omnibus Motion in Limine [176] is GRANTED in part and DENIED in part as follows:
1) Defendants will be precluded from arguing that the “date of contracting” was any date after December 24, 2009, or that only publicly available information is relevant to shareholders’ reasonable expectations.
2) Defendants’ securities analyst reports will be excluded as hearsay unless defendants can show that any specific report factored into FHFA’s decisionmaking process or a hearsay exception applies.
3) Defendants will not be precluded at this stage from making any reference to Collins v. Yellen.
4) The deposition testimony of Bruce Berkowitz will be excluded.
5) Defendants will be precluded from offering evidence or arguments regarding when plaintiffs purchased their shares, with the understanding that the same ruling applies to plaintiffs.
6) Defendants will be precluded from offering evidence or arguments regarding plaintiffs’ wealth or sophistication.
It is further ORDERED that Defendants’ Motion in Limine [177] to Exclude Evidence of Plaintiffs’ Subjective Expectations is GRANTED insofar as plaintiffs may not offer evidence of individual shareholders’ subjective expectations or when they purchased their shares and DENIED in all other respects.
It is further ORDERED that Defendants’ Motion in Limine [178] to Exclude Evidence of Treasury or White House Intent Not Communicated to FHFA is DENIED.
It is further ORDERED that Defendants’ Motion in Limine [181] to Exclude the Testimony of Susan Hartman is GRANTED insofar as she proposes to present demonstratives of non-voluminous records that are not themselves offered into evidence and DENIED in all other respects.
It is further ORDERED that Defendants’ Motion in Limine [206] to Compel One Appearance of Defendants’ Fact Witness Edward DeMarco is DENIED as untimely.
It is further ORDERED that Defendants’ Motion [212] for Leave to File a Supplemental Memorandum Regarding Professor Kothari’s Testimony is GRANTED.
2
The Memorandum Opinion was filed under seal because it references documents the parties filed under seal. It is hereby ORDERED that the parties meet and confer and jointly identify which, if any, parts of the Memorandum Opinion should remain sealed within three days.
IT IS SO ORDERED.
Date: October 13, 2022
_/s/ Royce C. Lamberth_____ Royce C. Lamberth
United States District Judge
Following yesterday's pre-trial conference, Judge Lamberth entered an omnibus order on ten requests to limit what the jury will see and hear, and a copy of that order is attached to this e-mail message. Most, if not all of those motions in limine were filed and remain under seal. Judge Lamberth's reasoning for his rulings is laid out in a memorandum opinion we won't see for a couple of days.
Wait for sunlight to be shed on evidence collected. It will give a clear picture of what was cooking behind the scenes. Whats been told publicly was opposite of whats being discussed behind the doors. We have only seen a small fraction of docs in possession of plaintiffs’ lawyers still kept sealed.
And also Susan McFarland’s testimony, three big ones to watch for. All those three will finally help us give what we lost since 2012.
Lost value to me and also Hamish Hume is $130B taken away from shareholders above the bailout amount paid back with 10% interest.
https://dsnews.com/news/04-19-2016/counsels-corner-the-battle-over-gse-profits-is-raging
Thanks for all the details Robert, sounds like this could be end up as one of most important cases he must have ruled against the govt. in his career. He is dealing with theft of $150B in shareholders value by your own govt, you don’t hear it everyday. Imo Judge and jury will show govt what “good faith and fair dealing” means in a contract signed between two parties in US. Law is law and nobody is above the law.
Hope you are attending the trial next week Robert :)
Thanks Robert, their faces will turn red when jury gets chance to see those secret docs n emails they tried so desperately to keep them sealed for so many yrs plus hear witnesses and experts explaining in detail what govt did to shareholders. Their Big Lie will be uncovered the day Ugoletti shows up for testimony. That day their game will be over imo.
Please update us when ever you get chance. Thanks in advance. Hoping to hear some stuff about how the trial will proceed in court room # 15, under Lamberth’s direction.
It’s at 1pm, please let us know how it goes.
Reliance Damages
Stacy's reliance damages are $10,000. We know this because this is the amount of money Stacy spent. Remember that reliance damages are money damages that are awarded to an innocent party for the losses suffered due to reasonable reliance on a promise. Let's take a further look at Stacy's reliance damages.
In our scenario, Sam breached the contract and Stacy is the innocent party. Stacy spent $10,000 after she reasonably relied on Sam's promise. Stacy believed that she would complete the house for Sam, and that Sam would pay her in full. Stacy didn't have any reason to believe that Sam wouldn't fulfill his duties under the contract. By the time she realized Sam wouldn't comply, she'd already spent $10,000.
Reliance damages are meant to restore the innocent party. The court calculates these damages by determining what amount of money it would take to re-establish the innocent party's economic position. This means that Stacy will be awarded damages in order to place her back in the economic position she held before she reasonably relied on Sam's promise. Before that time, Stacy had $10,000 that she no longer has.
When Reliance Will Be Used
Usually, when a court rules that a breach of contract occurred, it will award expectation damages to the innocent party. These are damages awarded to compensate the loss of future income caused by a breach of contract. We know that Stacy expected to receive $100,000 for building Sam's house. We don't know the amount of Stacy's anticipated expenses, if any. If Stacy expected to incur expenses while building the house, this amount will be subtracted from the $100,000. The court can probably calculate Stacy's expectation damages without too much trouble, but sometimes future income is uncertain, making the use of expectation damages impractical.
Let's consider the 1998 case of Hollywood Fantasy Corporation v. Gabor. Hollywood Fantasy Corporation was a business that provided fantasy vacation camps. The vacation camps allowed vacationers to make a pretend movie with a real actor or actress. The corporation planned an event featuring Zsa Zsa Gabor, but Gabor cancelled her appearance only two weeks before the event, and after tickets were sold to vacationers. The corporation ended up canceling the entire vacation event, and, shortly afterward, completely went out of business.
The corporation sued Gabor for breach of contract. The corporation's lost profits were too vague to allow traditional expectation damages. The court couldn't practically determine how many more tickets were to be sold, or the exact profits that might be made from the filmed portions of the event.
However, the corporation was allowed to recover reliance damages. The court ordered damages to cover the corporation's expenses incurred in reliance on Gabor's promise to appear at the event. This included the corporation's actual expenses, such as money spent on printing brochures and advertising the event.
Damages:
Stacy is a builder. Sam hires Stacy to build his beautiful new house for $100,000. The payment is due to Stacy in four installments of $25,000 each. The first installment is due next month. Stacy purchases $10,000 worth of building supplies and starts building Sam's house. After she completes the foundation, Sam refuses to make the first payment. He denies that he has a contract with Stacy.
Stacy sues Sam for breach of contract. If the court agrees with Stacy, it will need to determine what type of damages to award her. Let's discuss two different options. If the court awards reliance damages, Sam will have to pay Stacy $10,000. Reliance damages are money damages that are awarded to an innocent party for the losses suffered due to a reasonable reliance on a promise.
If the court awards restitution, Sam will have to pay Stacy for the value of her completed foundation. Restitution damages are money damages that are awarded to an innocent party to compensate for the benefit that party gave.
Both of these damage awards involve a loss to the innocent party. The key difference between reliance damages and restitution is that restitution will always involve a loss to the innocent party that benefits the other party. Reliance involves a loss to the innocent party that doesn't benefit the other party.
Paulson & Jim Parrott could still be called…..if needed….they all must be regretting why we wrote all those emails and a book back then.
we will call any Treasury officials (former or current) who are needed to address authenticity or other admissibility issues for any Treasury exhibits to which Defendants object as to admissibility
In accordance with the parties’ proposed schedule to the Court, please find below Plaintiffs’ current list of witnesses we may present at trial via either live or deposition testimony. As discussed previously, please let us know if the witnesses you represent on this list and who reside outside the 100 mile limit are willing to voluntarily appear to testify (subject to any reasonable cost reimbursement). In addition to the list below, we also reserve the right to call any witness on Defendants’ trial witness list and to call witnesses not previously identified for impeachment.
1. Joseph Cacciapalle 2. Timothy Cassell
3. Michelle Miller
4. Edward Linekin
5. Summary Witness(es) (we anticipate calling a summary witness who will present a purely factual summary of information based on a review of the financial and contractual documents; the information to be summarized will be disclosed in the pretrial statement)
6. David Benson
7. Timothy Mayopoulos 8. Susan McFarland
9. Don Layton
10. Ross Kari
11. Jim Lockhart
12. Ed DeMarco
13. Mario Ugoletti 14. Naa Awaa Tagoe 15. Bala Dharan
16. Anjan Thakor 17. Joseph Mason
In addition to the foregoing, and in connection with the list of documents we produced late last week, we will call any Treasury officials (former or current) who are needed to address authenticity or other admissibility issues for any Treasury exhibits to which Defendants object as to admissibility, whether for authenticity or other issues on which a witness would be needed. We are hopeful this will not be necessary. Also, per prior conversations, we reserve the right to revise or supplement this list as appropriate.
In the ruling today, the climax of five years of litigation between doctors and the Clinton Administration, Judge Royce C. Lamberth of Federal District Court said: ''It is clear that the decisions here were made at the highest levels of Government, and the Government itself is -- and should be -- accountable when its officials run amok. There were no rogue lawyers here misleading this court.''
Rather, Judge Lamberth said, ''the executive branch of the Government, working in tandem, was dishonest with this court, and the Government must now face the consequences of its misconduct.''
The Administration's efforts to correct the misstatements were feeble and belated, the judge said.
Judge Lamberth said ''the Department of Justice succumbed to pressure from White House attorneys'' and ''never corrected any of the factual inaccuracies'' in Mr. Magaziner's sworn statements to the court.
''The most outrageous conduct by the Government in this case is what happened when it never corrected or updated the Magaziner declaration,'' the judge said, and he added:
''It seems that some Government officials never learn that the cover-up can be worse than the underlying conduct. Most shocking to this court, and deeply disappointing, is that the Department of Justice would participate in such conduct.''
After concluding that the Administration had acted in bad faith, Judge Lamberth declared, ''This type of conduct is reprehensible, and the Government must be held accountable for it.''
Me too. He has only 7 Cos in his portfolio and staff of 42 talented highly paid employees who owns 30% stake of his portfolio of $8B so our interests are aligned with theirs. His interest rate hedge turned from $400M into $2.7B recently.
You mean 1938 for Fannie & 1970 for Freddie
And if that over payment of $130B that Hamish Hume wants to come back, we exit cship before Xmas with $225B capital with almost 3% cap rate on $7.6T portfolio.
Anything is possible since jury will see the evidence before verdict and that money doesn’t comes out of their pockets anyways so why would they be not fair to us?
https://dsnews.com/news/04-19-2016/counsels-corner-the-battle-over-gse-profits-is-raging
Yes when I read that I could see $130B coming back to FnF. Buckle up next two weeks
Yes he got to explain the jury why lied, maybe he will have to open the closet of skeletons to save himself, in about a week or so. But at least we will appreciate him for his perjury & lie under oath when we start trading at $25 & above in Nov
You can’t make this stuff up: Mr. Ugoletti left the government in September 2015 and is reportedly living in Ecuador – which is said to have an enviably loopholed extradition treaty with the United States.
-Gary Hindes
Delaware Bay Company LLC
“Let the people know the facts and the country will be safe.” – A. Lincoln.
HINDESightTM July 25, 2017
FANNIEGATE: THE COVER-UP UNRAVELS.
Forced by Court Order, the Government Turns Over Documents Evidencing Perjury and Obstruction of Justice.
OBAMA ADMINISTRATION KNEW THE GSES WERE ON THE VERGE OF RECORDING RECORD PROFITS – BUT DOJ CONTINUES TO TELL THE COURTS THEY WERE IN A PURPORTED “DEATH SPIRAL”.
Proof the September ’08 takeover wasn’t a ‘bailout’,
it was a stick-up.
WHEN WILL A JUDGE HAVE THE COURAGE TO SAY: “ENOUGH!”?
In our last exciting episode, “The Case of the Concrete Life Preserver” (HINDESightTM Nov. 25, 2016), I related how the Obama Administration was withholding over 11,000 documents from public scrutiny due to “national security” concerns. National security indeed. As it turns out, the documents in question have nothing to do with national security and everything to do with keeping perjury and obstruction of justice by top White House and Treasury Department officials from coming to light.
Last week, some 3500 of those documents were finally produced to the plaintiffs in Fairholme Funds v. United States (No. 13-465 Fed. Cl.) under court order (natch). It ain’t a pretty picture – and if Mr. Trump and his people really want to drain the swamp, Treasury and the Federal Housing Finance Agency (“FHFA”) are good places to start. In the
meantime, the Inspectors General of both agencies should open formal investigations.
In courts around the country – including the Fifth, Sixth, Seventh, Eighth, and District of Columbia Circuits – FHFA (Conservator of Fannie Mae and Freddie Mac) and Treasury continue to assert that the imposition of the unprecedented Net Worth Sweep in August 2012 was necessary because it “arrested the draws-to-pay-dividends cycle that threatened to erode Treasury’s unused funding commitment.” (U.S. Treasury Brief, 8th Circuit Court of Appeals, June 27, 2017). However, the newly unsealed documents prove that this explanation for the Net Worth Sweep is patently false. Furthermore, we now know that both agencies anticipated that the Companies’ future profits would exceed the 10 percent cash dividend rate that Fannie and Freddie had been required to pay prior to the imposition of
the Net Worth Sweep. And far from imposing the Net Worth Sweep to somehow help or assist the Companies, these documents show that the purpose was to dramatically increase the amount of money paid to the government (at a time when Treasury was desperately looking for additional sources of cash to avoid hitting the debt ceiling and triggering a GOP- threatened government shutdown) – and to prevent Fannie and Freddie from ever rebuilding capital or exiting conservatorship – a blatant violation of federal law. Indeed, as Treasury and FHFA anticipated, the Net Worth Sweep has enabled Treasury to seize an additional $130 billion from these two publicly traded, shareholder-owned companies over and above the 10 percent dividend to which it otherwise would have been entitled.
Obviously, I haven’t had time to get through all the documents, but Fairholme’s Dan Schmerin points out the following highlights:
The Delaware Bay Company, LLC
Ms. Miller was so concerned about liquidating the GSEs (which it has effectively done via the Net Worth Sweep) that she feared Treasury’s own preferred stock in the GSEs might be “wiped out in receivership.” (UST00473640).
2. FHFA forced the Companies to make unjustified loan loss reserve and deferred tax asset accounting decisions that artificially increased the Companies’ draws from Treasury, thereby giving the appearance that they required a bailout when they did not.
A key document which the government has fought tooth-and-nail to keep secret is a confidential, in-depth analysis of the GSEs’ financial prospects which Treasury had ordered up just a month before Hank Paulson showed up on their doorsteps with his bazooka. We now learn that Treasury had been told by the noted investment firm BlackRock, Inc. that, for instance, Freddie’s “long-term solvency does not appear endangered – we do not expect Freddie Mac to breach critical capital levels even in stress case.” (FHFA00056237, at 3). But that simply would not do for a Treasury Department which saw in the then- chaotic conditions of the financial crisis an opportunity to nationalize Fannie Mae and Freddie Mac without compensating their owners. So, as I have previously described in “The Myth of Private Gains and Public Losses” (HINDESightTM Sept. 6, 2016), once they had control, Treasury and FHFA ordered the GSEs to start booking wildly inflated paper losses. Absent those unjustified, unnecessary, and erroneous accounting entries (virtually all of which had to be reversed four years later), Fannie and Freddie would have needed little or no money from Treasury. It wasn’t a bailout, it was a stick-up.
3. Contrary to their public statements, the Obama White House and Treasury knew that the Net Worth Sweep would result in a windfall for
the federal government.
An email from a Treasury official dated July 20, 2012, recognized the possibility that restructuring the dividend would lead to “a better outcome” for Treasury in light of projections about the Companies’
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FHFA and Treasury repeatedly acknowledged that the conservator has a legal obligation to preserve and conserve the Companies’ assets and restore them to soundness and solvency, but chose to ignore these statutory imperatives by imposing the Net Worth Sweep.
Treasury documents acknowledge that “FHFA as conservator is required to preserve assets,” (UST00473629, at 12) and that one of the legal constraints imposed on FHFA is its “mandate to ‘conserve assets.’” (UST00406435). FHFA similarly recognized it “has a responsibility to take such actions as may be necessary to put the Enterprises in a sound and solvent condition and to preserve and conserve their assets and property.” (FHFA00105087, at 7). A December 12, 2011 memorandum from Mary Miller, assistant secretary for financial markets, to Treasury Secretary Tim Geithner emphasized the distinction between conservatorship and receivership: “Considerations: First, in conservatorship the entities are treated as going concerns, and FHFA as conservator is required to preserve assets. In receivership, the entities would be in wind-down (i.e., liquidation), and FHFA as receiver would be looking to sell the assets for as much money as it could”. Indeed,
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future profitability. (UST00555247). A question-and- answer document circulated among Treasury officials on July 20, 2012, stated that Treasury would be “in a better position” after the Net Worth Sweep because “the GSEs would be making a binding contractual commitment to turn over profits to taxpayers, as opposed to the current discretionary dividend.” (UST00061432). And on August 13, 2012, Jim Parrott – the White House official who worked most closely with Treasury in concocting the Net Worth Sweep – wrote in an email that “we are making sure that each of these entities pays the taxpayer back every dollar of profit they make, not just a 10% dividend” and that “the taxpayer will thus ultimately collect more money with the changes.” (UST00061143)
These previously withheld internal agency communications directly contradict the sworn declaration of former Treasury and FHFA official Mario Ugoletti, who stated on December 17, 2013, under penalty of perjury that: “These changes in structure did not change the underlying economics of the PSPAs ... Treasury would receive as much from the Enterprises under the Second Amendment as it would under the Third Amendment. Thus, the intention of the Third Amendment was not to increase compensation to Treasury – the Amendment would not do that – but to protect the Enterprises from the erosion of the Treasury commitment that was threatened by the fixed dividend” (i.e., the “death spiral” excuse).1 (D.D.C. Case 1:13-cv-01025-RLW Document 27-2 Filed 12/17/13)
Presciently, a Treasury official named Benson Roberts observed in an August 13, 2012 email that the “death spiral” explanation that both agencies trumpeted when announcing the Net Worth Sweep (and which the Trump DOJ repeated in a court filing less than a month ago)“doesn’t hold water.” (UST00406517, at 13).
4. The Net Worth Sweep was purposely timed to coincide with the Companies’ return to sustained profitability so as to achieve Treasury’s extralegal policy
1 You can’t make this stuff up: Mr. Ugoletti left the government in September 2015 and is reportedly living in Ecuador – which is said to have an enviably loopholed extradition treaty with the United States.
The Delaware Bay Company, LLC
objective of eliminating both Companies.
An email from Brian Deese at the White House on July 22, 2012, to Treasury officials reveals Treasury’s desire to impose the Net Worth Sweep swiftly: “Gene and I are concerned about timing ... if you [Treasury] guys are landing on moving out fast we should discuss.” (UST00517876). An internal Treasury document prepared on July 30, 2012, stated that the Net Worth Sweep should be announced shortly after August 7, when the “GSEs will report very strong earnings . . . that will be in-excess of the 10% dividend to be paid to Treasury,” (UST00533618) and on August 1, 2012, a Treasury official emphasized that the Net Worth Sweep should be announced in mid- August because Fannie and Freddie’s “earnings will be in excess of current 10% dividend paid to Treasury.” (UST00385572). A Treasury official observed on August 13, 2012, that the imposition of the Net Worth Sweep was “really a mechanical means to broader policy objectives,” and questioned “How can we argue that (government) ownership/control is temporary if we will be sweeping their (entire) net worth? Doesn’t that ensure the GSEs will have no exit from conservatorship?” (UST00406521). Finally, a Q&A document prepared by Treasury on August 13, 2012, revealed the motivation to promptly impose the Net Worth Sweep: “Given their improvement in operating performance and our intention to wind them down, we think the current steps being taken are appropriate.” (UST00406521)
‘May’ versus ‘shall’
Alas, only one federal judge has disagreed with Treasury and FHFA’s position that under the law, no court can review their decisions when it comes to the GSEs – but that one was in a vigorous dissenting opinion. All others have piggybacked off Judge Royce C. Lamberth’s September 2014 Opinion dismissing Fairholme’s lawsuit, a decision which was upheld 2-1 at the U.S. Court of Appeals for the District of Columbia Circuit. But as dissenting Judge Janice Rogers Brown pointed out, the majority’s logic makes no sense. It cited the portion of the law which says
http://www.valuewalk.com/2016/04/unsealed-gse-litigation- documents-show-government-claims-filings-questionable-best/.
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that as conservator, FHFA “may take such actions as may be necessary to put the Enterprises in a sound and solvent condition and to preserve and conserve their assets and property.” According to the Court of Appeals, because the statute uses the word “may” instead of “shall”, FHFA’s duty is not obligatory, but merely optional2 – and its director has unfettered leeway to do whatever he wishes with Fannie and Freddie’s assets (including, if he deems it in their or his agency’s best interest, selling said assets to his brother-in-law). Of course, this position is simply preposterous and it is, frankly, shameful that Senior Judge Douglas Ginsburg decided to go along with Judge Patricia Millet’s patently outlandish logic. Admittedly, neither had the benefit of the documents which have only now been made public – nor, for that matter, have any of the other judges. And while the D.C. Circuit’s decision is not binding on any of the other circuits, at least three have appeals pending and have yet to weigh in. You can be sure that they will shortly be provided with the newly-released evidence which proves beyond a doubt that the government has been lying all along and that, indeed, the very act of trying to keep those documents secret and hide them under a cockamamie theory that allowing the public to see what is in them would create panic and cause another major financial crisis, is (in my opinion, at least), a clear act of obstructing justice.
The Delaware Bay Company, LLC
Gary E. Hindes July 25, 2017 646-467-5242 gary.hindes@delawarebayllc.com
The Sixth Circuit ruled in the Rop case today:
(A) Acting Director DeMarco was not serving in violation of the Appointments Clause when he signed the third amendment; and
(B) the case is remanded to the district court to determine whether the unconstitutional removal restriction inflicted harm on shareholders;
We will wait see why Hamish Hume’s team requested jury trial vs bench trial, in next 3 weeks imo
Its the jury who will do fact finding here starting 10/17. So sky is limit as to how much they award us, their verdict may also ask UST to return $130B (stolen in bad faith) to fnf, beyond the bailout amount, which would help us exit cship the very next day at 2.5% cap ratio, imo
Decision Making: The primary difference between jury trials and bench trials is the decision-making authority. In a jury trial, decision making is shared between 12 individuals who must deliberate prior to reaching a verdict. During a bench trial, the judge is the sole individual who determines guilty or not guilty.
So what we read is just judge Lamberth’s opinion, jury may still say we will award $20 for last years lost dividend since fnf were paying $2 a yr before cship