Skeptic7 - Here is Count I of the Kelly Suit :
108. In imposing the conservatorships over the GSEs and in taking and/or illegally
exacting more than 1 billion shares of the common stock and approximately 597 million shares of
the preferred stock of Fannie Mae (with a redemption value of approximately $21 billion) and
approximately 650 million shares of the common stock and approximately 464.1 million shares of
the preferred stock of Freddie Mac (with a redemption value of approximately $14 billion) without
just compensation, the Government destroyed the rights and value of the property interests tied to
the common and preferred stock of the GSEs held by Plaintiffs, nullified their reasonable,
investment-backed expectations, and violated the fundamental principles of the Due Process and
Takings Clauses of the United States Constitution.
109. In taking private property, the Government is required to adhere to due process of
law and to respect the legal rights of affected parties.
110. The Government violated the statutory, contractual, and constitutional rights of
Plaintiffs in taking and/or illegally exacting virtually all the value of the above referenced preferred
shares of both Fannie Mae and Freddie Mac that they owned, without providing just compensation.
111. The conservatorships were not lawfully imposed. The conditions required for
conservatorship delineated in HERA were not satisfied. Specifically: (A) both GSEs were solvent
as of September 6, 2008; (B) the GSEs had not experienced any substantial dissipation in their
assets or earnings due to any legal violations or unsafe or unsound practices; (C) the GSEs were
not transacting business under unsafe or unsound conditions; (D) the GSEs had not committed any
violations of a cease and desist order; (E) the GSEs had not concealed any records from the FHFA;
(F) the GSEs were likely to be able to pay their obligations and meet the demands of their creditors;
(G) the GSEs had not and were not likely to incur losses that would have depleted their capital;
(H) the GSEs had not committed any violation of any law or used any unsafe practice likely to
Case 1:21-cv-01949-KCD Document 1 Filed 10/01/21 Page 38 of 45
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cause insolvency or weaken the companies’ condition; (J) the GSEs were not undercapitalized
without the prospect of becoming adequately capitalized; (K) the GSEs were not critically
undercapitalized; and (L) the GSEs had not committed money laundering.
112. The GSEs did not validly consent to the conservatorships. The Government falsely
informed the GSEs that they had no choice but to consent or the Government would impose
conservatorship regardless. Government officials did not give the boards any meaningful notice.
Furthermore, they suggested that the board members would face personal reputational risk if they
did not consent. As the boards’ consent was based on false information, coercion, and improper
threats, it was not a legally valid basis on which to impose a conservatorship.
113. As a holder of $898,448,392 of preferred shares in both GSEs, FBOP Subsidiaries
had the right to dividend payments. FBOP Subsidiaries also had voting rights to protect those
dividend rights. FBOP Subsidiaries had a property interest in these rights, as well as in the value
of the shares themselves. As a holder of approximately $40 million of GSE preferred shares the
FBOP wholly-owned non-bank subsidiary, River Capital, had the right to dividend payments.
River Capital also had voting rights to protect those dividend rights. River Capital had a property
interest in these rights, as well as in the value of the shares themselves.
114. Through the conservatorship, in violation of the Fifth Amendment, the Government
seized the rights attached to the shares and rendered the shares effectively worthless. The FBOP
Subsidiaries and River Capital were thereby deprived of all use and benefit of their shares. As the
shares had been rendered worthless, the FBOP Subsidiaries and River Capital could no longer
make economically beneficial use of the shares; their sale value was negligible, particularly since
they no longer had voting or dividend rights attached to the shares.
