Fannie Mae lawsuits – Judge Sweeney Again Insists the Government Produce Documents

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Yet again, U.S. Court of Federal Claims Judge Margaret Sweeney’s response to the government’s plea to keep its machinations on the Net Worth Sweep under lock and key is a principled “No!”

Judge Sweeney today granted Fairholme Funds’ motion to compel the government to produce some 50 documents that government lawyers wanted withheld under the guise of executive privilege.  It appears that Judge Sweeney, after reviewing documents herself, rejected the government’s claims of privilege on all of them and granted in full the motion to compel the government to hand the over to plaintiff’s lawyers.

For now, the documents will remain under the “protective order.” This means only the plaintiff’s lawyers can actually see them. But these documents will certainly provide lawyers with new insights into what the government was thinking when it devised the plan to confiscate Fannie and Freddie’s revenues. Eventually, the documents will be the subject of legal briefs and unsealed.

Judge Sweeney has consistently rejected the government’s sweeping and aggressive efforts to keep its deliberations a secret.  Back in April, she unsealed seven documents sought by plaintiffs, Perry Capital, Inc. In May, she decided it was time to take the lid off 53 documents in a case brought by Fairholme Funds. A trove of unsealed documents is posted at FannieFreddiesecrets.org. Many revealed damaging evidence just as oral arguments were getting under way in an appeal of Judge Royce Lamberth’s dismissal of Perry’s suit. The Appeals Court decision is expected soon.

In her April ruling, Sweeney signaled skepticism bordering on annoyance with the government’s penchant for secrecy. She scoffed at the notion that the disclosure of the information in the documents that go back several years could harm financial markets today. The only “harm” that could result would be criticism of an agency, institution, and decision-makers. “The court will not condone the misuse of a protective order as a shield to insulate public officials from criticism in the way they execute their public duties,” she declared.

She amplified this, writing, “Thus, avoidance of “second-guessing” an agency’s decisions several years after the fact, as described by Mr. Watt, is, with the passage of time no longer a legitimate basis to maintain documents under a protective order.” This excerpt from that ruling appears to continue to inform her judgement:

Moreover, there can be no serious dispute that it is extremely rare for a document filed under seal in a civil case to remain so for all time. There is no suggestion that the documents subject to the protective order are classified as relating to national security. Nor do these documents contain trade secrets or proprietary information. However, even cases in which trade secrets and proprietary information are filed under seal and subject to a protective order, it is not unusual that after the passage of time, that same information is eventually unsealed because the protective order has outlived its usefulness. Indeed, because the government does not argue that information that it requests remain protected concerns matters involving national security, trade secrets, or proprietary information, or that specific privileges attach to any of the seven documents, it is clear that there is no longer a need to maintain the protected designation for them.

In the course of the many shareholder lawsuits brought against the government as a result of the Net Worth Sweep, roughly 12,000 documents have been hidden by invocation of some form of executive privilege and about 63,000 because of invocation of the protective order. This is unprecedented.

As Judge Sweeney continues to crack the government’s wall of secrecy, it appears her patience is wearing thin. Last spring, she chided the government for its contradictory position. She wrote, “The court notes that from the inception of this litigation, the government has consistently maintained that the court lacks jurisdiction over this case because the United States had no control over the enterprises. Taking the government at its word, it is surprising that defendant is concerned with the unsealing of government officials’ deposition testimony.”

In today’s ruling, she called on the government to explain why it should not have to pay Fairholme’s legal fees for this motion. This suggests that she found the government’s argument’s particularly meritless. In essence, she wants to know why shareholders are bearing the cost of fighting for access to documents that should have been accessible in the first place.

Indeed, the Sweep has been costly for shareholders. Enough is enough.