Fannie Mae, Freddie Mac: Ted Olson’s Shot Across the Bow by Todd Sullivan, ValuePlays
Perry Capital has asked to join Fairholme’s request for supplementation of the record. Ted Olson has done so in a way that all but makes the claim Treasury and FHFA are duplicitous in hiding/omitting documents in this case. Nothing pisses off a judge more that the specter of one side mocking their decision (by ignoring it) or playing games with the process. Nothing…..
As for the lawyers, it is a quick and easy way to be held in contempt or sanctioned for this type of activity so one might expect Lamberth, who until this point has abdicated his duty as a judge to Sweeney in the DC Court of Claims (in so far as making any rulings on this case) to come out rather harshly towards defendants lawyers or run the risk of being looked as though he has no control over his courtroom (many suggest this may already be the case).
There are additional ramifications to this also. So much of what is being decided here goes to credibility. When Fairholme/Perry/Ackman etc claim Treasury/FHFA are not being forthcoming with discovery and seek additional orders from the judge to require more and defendant’s lawyers claim they are, do actions like what is described below give them more or less credibility with the judge?
Fannie Mae, Freddie Mac: Olson says Treasury/FHFA claims were untruthful
One has to really step back here and read what Olson is saying. In no uncertain terms he is saying Treasury/FHFA were not being truthful when they claimed:
1- Tax attributes of >$100B were “never” discussed prior to the 3rd amendment (this is either an egregious lie or a signal of abject incompetence on a unfathomable scale)
2- Contrary to the “downward spiral” they claim the Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC)’s were in, the memo clearly depicts rapidly improving finances
3- There were in fact several other options available instead of the Net Worth Sweep (contrary to claims)
4- Both Treasury/FHFA claim FHFA did NOT act at behest of the Treasury yet FHFA was NOT present at the Blackstone meeting indicating Treasury in fact had a VERY active role in what was happening with Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC)’s (this was the sole role of FHFA)
Now, it is important to note that this meeting took place over year before the 3rd amendment was enacted so even if Treasury had financial projections for Fannie Mae and Freddie Mac’s that were far less optimistic than The Blackstone Group L.P. (NYSE:BX)’s at this meeting, there was a year for things to play out to determine if they or Blackstone’s were more accurate (Spoiler Alert: Blackstone’s were).
DTA coming to fruition at Fannie Mae, Freddie Mac
Let’s take it further. Defendants briefs and statements by officials in these cases all claim they never discussed or considered the DTA’s that were obviously coming to fruition at Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC)’s. Now, this memo casts very real doubt on that claim and one has to wonder if people at FHFA/Treasury are getting nervous. The claims were made in court filings, you don’t get to go back and ask for a “do over” when documents come to light that counter your statement. Should more documents come out trashing that claim, someone has a real serious problem on their hands.
Finally, what Olson is really doing here is ingenious. He is trying this case publicly via his request. He lays out evidence and then links it to each of Treasury/FHFA’s claims and then illustrates how the evidence refutes each of them. Now, this isn’t for the general public (they aren’t reading this) but it sure as hell is for other plaintiffs, media members, members of Congress, the judge, and Treasury/FHFA officials.
Wanna see members of Congress scramble away from this faster than high school sophomores from a party the cops show up at? Just give them a hint something nefarious went on. They will switch sides on this in a heartbeat and support shareholders (think unions/pension funds).
Fannie Mae, Freddie Mac: Deposition list during discovery
Most importantly this is for those on the deposition list during discovery. He is telling them where plaintiffs stand and it letting them know they might not want to stick to the company line (as it pertains to the above issues) or perhaps they are committing perjury. All plaintiffs need is one person to spill it…just one and this whole thing explodes.
C. Disclosure Of The Blackstone Presentation
On July 29, 2014, the website TheStreet, a financial news and services website, published a PowerPoint presentation that Blackstone, a global investment and advisory firm, and the law firm Skadden, Arps, Slate, Meagher & Flom LLP presented to Treasury on June 13, 2011. See Dan Freed, Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) Investor Blackstone Also Sought Advisory Role, TheStreet (July 29, 2014), http://www.thestreet.com/story/12823463/1/fannie-and-freddie-investor-blackstone- also-sought-advisory-role.html (follow link in second paragraph to “pitch documents provided to TheStreet”). Neither Record filed with this Court includes the Blackstone Presentation, even though on its face it constitutes a document that was before the administrative decisionmaker at the relevant time.
Among other things, the Presentation laid out potential ways that Treasury could create value and stability for the Companies, principally by restructuring Fannie’s and Freddie’s stock. See Blackstone Presentation 34-40. It also gave an overview of the Companies’ situation, including their overall financial health and the White House’s emphasis on winding down the Companies. See Blackstone Presentation 27-33.
Fannie Mae, Freddie Mac: The argument
Perry Capital now joins Fairholme’s requests to this Court for supplementation of the Record. See Fairholme Mot. to Supplement 14-27; Fairholme Reply 9-22. The APA requires courts to review the “whole record,” 5 U.S.C. § 706, meaning “neither more nor less than what was before the agency at the time it made its decision.” Marcum v. Salazar, 751 F. Supp. 2d 74, 78 (D.D.C. 2010) (citing IMS, P.C. v. Alvarez, 129 F.3d 618, 623 (D.C. Cir. 1997)). The Record filed here, however, has gaping holes. As Fairholme has explained, some of those gaps are known: key financial projections and associated records referenced by other documents, the missing Freddie Mac projections, materials from the Department of Justice, and privilege logs to justify any documents that Treasury and FHFA have withheld. See Fairholme Mot. to Supplement 17-20; Fairholme Reply 10-17. The government’s filings here suggest other gaps as well, further justifying supplementation of the filed Record. See Fairholme Mot. to Supplement 20-27; Fairholme Reply 17-22.
Now, the recent revelation of the Blackstone Presentation further bolsters Fairholme’s request for relief. It is clear that the document should have been included in Treasury’s Administrative Record all along. As a Treasury spokesman explained, the Blackstone Presentation was a “part of