Fannie Mae, Freddie Mac: Ackman Lawsuit Follow-Up by TimHoward717

Any American who reads this and does not feel compelled to stop it really needs to examine their beliefs.I am simply going to post the brief first 8 pages containing the preliminary statement from the Ackman/Commons injunction complaint.This requires very little analysis as it stands alone quite well. It presents very simply exactly what our government has done. This type of action is exactly what our founding fathers warned of, please folks for Gods sake take a few minutes and study theses eight pages. This is what happens when too many citizens choose blindly to believe the leaders of their parties. This is what happens when the majority of our citizens falsely believe that freedom is free. Thank God we have a judicial branch in our government, they are our last line of defense against this kind of government tyranny. Please send this brief portion of the complaint to your congressman and ask that if this is the America that your vote for them will get you? Send it to your newspaper editors and remind them the critical role they play in a democracy. The summons have gone out in this case today. How sweet it was reading each and every one. Demanding that those responsible answer to these crimes. I have attached a PDF below of both the summons and the entire complaint. Keep the Faith!

Fannie Mae, Freddie Mac: Ackman Lawsuit Follow-Up

Fannie Mae, Freddie Mac: Ackman Lawsuit Follow-Up



3085 Ebano Drive,

Walnut Creek, CA 94598




4101 Ingomar Street, N.W.

Washington, D.C. 20015



888 7th Avenue, 42nd Floor

New York, New York 10019




1500 Pennsylvania Avenue, N.W.

Washington, D.C. 20220


Constitution Center

400 7th Street, S.W.

Washington, D.C. 20024

JACOB J. LEW, in his official capacity as

Secretary of the Treasury,

1500 Pennsylvania Avenue, N.W.

Washington, D.C. 20220


MELVIN L. WATT, in his official capacity as Director of the Federal Housing Finance Agency,

Constitution Center

400 7th Street, S.W.

Washington, D.C. 20024


Civil Action No. 14-1404

Case 1:14-cv-01404 Document 1 Filed 08/15/14 Page 1 of 45



Plaintiffs Louise Rafter, Josephine Rattien, Stephen Rattien, and Pershing Square Capital Management, L.P. (“Pershing Square”) (collectively, the “Plaintiffs”), by and through their undersigned attorneys, allege as follows:


1. This is an action to redress an unlawful and enormous governmental expropriation in connection with the conservatorships of Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) (individually, a “Company”; collectively, the “Companies”).

2. In 2012, the Federal Housing Finance Agency (“FHFA”), purportedly acting as the conservator of the Companies, and the Department of the Treasury (“Treasury”)(collectively, the “Government”) agreed between themselves to strip all profits from the Companies and to sweep those profits to Treasury every quarter, in perpetuity (the “Net Worth Sweep Agreements”).

3. That Government confiscation of the entire net worth of the Companies is specifically intended not just to reap a windfall for the Government but to deprive the Companies’ common shareholders of any economic value in their shares. Through the confiscation, Treasury and FHFA simultaneously seek to “expedite the wind down of Fannie Mae and Freddie Mac.”

4. The Government’s brazen conduct in establishing the self-dealing Net Worth Sweep Agreements and requiring the ongoing quarterly sweeps (the “Net Worth Sweeps”) is illegal. It violates the Administrative Procedure Act and the statute that Congress constructed to govern conservatorship of the Companies. It breaches FHFA’s and Treasury’s fiduciary duties to Plaintiffs, including by, in effect, converting Treasury’s special class of preferred shares of the Case 1:14-cv-01404 Document 1 Filed 08/15/14 Page 2 of 45

Companies into a new super-senior form of preferred shares, for which the principal is never satisfied despite Treasury’s receiving all residual value of the Companies—a right reserved to common shares. Simultaneously, the Government’s new regime prevents Plaintiffs, who are common shareholders, from participating in their rightful economic share of the Companies’ distributions. The Government’s efforts to prevent Plaintiffs from pursuing any of their rights or powers as common shareholders, even as the Government illegally confiscates the economic value of their shares and liquidates the Companies, violates fundamental corporate law principles, including as established by state statute.

5. The Housing and Economic Recovery Act of 2008 (the “Act” or “HERA”) obligates FHFA as conservator to “put [a Company] in a sound and solvent condition,” “carry on [its] business,” and “preserve and conserve [its] assets and property.” HERA gives the conservator no authority to liquidate or wind down the Companies, much less to confiscate their entire net worth.

6. Treasury and FHFA decided to take the Companies into conservatorship soon after the enactment of HERA in 2008. HERA had granted Treasury temporary authority to purchase securities of each Company until the end of 2009. Shortly after appointing itself conservator in September 2008, FHFA entered into a Senior Preferred Stock Purchase Agreement with Treasury with respect to each Company (the “Stock Purchase Agreements”). Those Stock Purchase Agreements allowed each Company to draw funds from Treasury in exchange for various interests and compensation, including a quarterly dividend at a fixed annual rate of 10% in cash or 12% in kind. Those basic terms remained in place until Treasury and FHFA radically altered them, in effect creating an entirely new security, through the 2012 Net Worth Sweep Agreements. Case 1:14-cv-01404 Document 1 Filed 08/15/14 Page 3 of 45

7. Congress chartered Fannie Mae / Federal National Mortgage Assctn Fnni Me (OTCBB:FNMA) and Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) to operate as privately owned, for-profit corporations. Their stocks were widely held before conservatorship and remain so today. Plaintiffs in this action include a retired nurse who has held common shares of Fannie Mae for approximately 25 years, and a retired psychiatric social worker and a retired scientist who have held common shares of Fannie Mae for approximately 15 years.

8. HERA makes clear Congress’s intent to “maintain [each Company’s] status as a private shareholder-owned company.” 12 U.S.C. §§ 1455(l)(1)(C)(v), 1719(g)(1)(C)(v). Under HERA, only in receivership—in contrast to conservatorship—can the rights of shareholders be “terminate[d],” id. § 4617(b)(2)(K)(i), and even then, the Act gives shareholders procedural protections, including the right to seek judicial review. Indeed, upon taking the Companies into conservatorship and entering into the Stock Purchase Agreements with Treasury, then-FHFA Director James B. Lockhart publicly affirmed that, during conservatorship, the Companies’ stock would remain outstanding and continue to trade, and “[s]tockholders w[ould] continue to retain all rights in the stock’s financial worth” (emphasis added). As then-Treasury Secretary Henry M. Paulson stated on September 7, 2008, “conservatorship does not eliminate the common stock” (emphasis added).

9. The Companies’ financial results had improved markedly by 2012. By the end of the second quarter of 2012, both Companies were profitable, with the prospect of exceptionally large future profits.

10. Treasury’s authority to purchase securities of the Companies had expired years earlier, at the end of 2009. But Treasury nevertheless devised the Net Worth Sweep Agreements with the intention of preventing the Companies’ other shareholders from ever realizing any economic benefit from their shares, of seizing all of the Companies’ profits for itself, and of furthering its long-held plan to liquidate the Companies. It is

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