Regarding the Duty of Candor issue - how do you look at the liability will play out in a Derivative claim. Am I right to assume that the Company probably fully indemnified the Board so pursuant to the indemnification the Company is liable for the breach of the Duty? How would this work in a Derivative claim since damages will be paid to the Company?
Regarding the Duty of Candor issue, the boards should have “minute meetings” about the conservatorship issue, all large important issues will be discussed in meetings with all the board members, with a lack of a transcript of the minute meetings and proper documentation supporting the claims from the FHFA that they were instable, nobody is informed about what happened, and if indeed the companies were in financial distress, the BOD lacked telling investors prior and after conservatorship, but weeks before the conservatorship they were in sound condition(according the officials on national television) so FHFA has a duress/coercion problem. That is why fairholme now in their amended complaint is talking about a implied-in-fact contract, fairholme after discovery concluded there is no consent or transcript of the minute meetings, so what was the ground of entering in FnF, and that is why they amended their complaint with count XI and XII, and since the BOD cannot enter into an implied-in-fact contract the conservatorship illegal, so count XI and XII rank higher as to all other claims, ones count XI and XII are proven to be incorrect and there is a transcript the other counts will come into play
It seems clear that the Fiduciary interest is for the benefit of Shareholders for FNMA since it is Delaware law. How about under Virgina law for FMCC?
It is possible for FNMA but HERA forbids it, for FMCC it is not possible in Virginia
Doesnt the breaches relating to the Board really go to the heart of the quote from Judge Sweeney about Hank Paulson and UST acting like "thugs". How can a BOD uphold its fiduciary duties when the first thing they hear is their heads hitting the ground?
Indeed they can’t uphold it or need to prove it, but then they already would have done so, the first thing Sweeney ruling will start with, is about how they entered, first count XI and XII will be ruled on, then the all other counts are moot
The direct claims were denied only for now, because of following 2 points
Direct claims are DENIED Because: “(1) a stockholder having majority or effective control causes the corporation to issue ‘excessive’ shares of its stock in exchange for assets of the controlling stockholder that have a lesser value,” and “(2) the exchange causes an increase in the percentage of the outstanding shares owned by the controlling stockholder, and a corresponding decrease in the share percentage owned by the public (minority) shareholders.”
In other words if treasury exercises the warrant the Direct claims can be brought again
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