Fannie Mae: Government Trying to Delay Fairholme Deposition of Officials

Fannie Mae: Government Trying to Delay Fairholme Deposition of Officials
Fannie Mae

Fannie Mae – Sweeney has set 3/31 as the date to hear arguments on the latest Staus Conf request

At issue is the government trying to squash the deposition of officials by Fairholme ($FAIRX):

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In accordance with this Court’s Order of August 13, 2014 (Doc. 85), the parties hereby notify the Court that they believe that it should hold a status conference to discuss Plaintiffs’ decision to move forward with depositions of Government witnesses before the Government has completed its production of documents.

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Because Fairholme has not disclosed to date what subpoenas, if any, it has served, we don’t know what Government witnesses might have received subpoenas from Fairholme.

Based on the privilege log excerpts shared in Fairholme’s latest letter to shareholders — see — Tim Geithner, Michael Stegman, and Timothy Bowler seem like likely candidates to receive subpoenas from Fairholme.

If the individual in receipt of the subpoena or the Government were to move to quash or modify a subpoena, that action would typically be filed in the U.S. District Court where the individual resides rather than in the Court of Federal Claims.  With that in mind, I’ve done a quick search for federal court actions in February and March 2015 involving these three gentlemen.  Nothing bubbles to the surface.  That said, I don’t think there’s any active litigation in other federal courts over any Fairholme subpoenas that’s been overlooked.  It’s possible, but improbable.

At the next Status Conference, it will not be hard to imagine that the Government’s lawyers will be saying something along the line of, “Your Honor, no individual Fairholme wants to depose at this early stage can possibly provide any testimony that will help you decide whether you have jurisdiction to consider Fairholme’s complaint and our motion to dismiss that complaint.  That’s a decision that you, Your Honor, need to make based on the evidence you already have.  And the right answer, Your Honor, is that you don’t have jurisdiction, because shareholders hold physical shares in Fannie and Freddie in their brokerage accounts.  The same shares that held prior to execution of the Third Amendment are still there today, and the speculators who purchased shares following execution of the Third Amendment still own those same shares today.  The Government’s taken nothing.  The losses some shareholders have realized are merely a reflection of reality in owning common stock in insolvent companies, and the shareholders who acquired shares at their absolute bottom and have realized a profit can’t be heard to complain.”  Fairholme, of course, will not agree with our Government’s myopic view of the law and the facts and encourage Judge Sweeney to view everything that’s happened from a much broader perspective.

My two cents on Fannie Mae:

Sweeney has said that “plaintiffs will have their day in court”. Deposing witnesses from the other side is part of that process. Part of what is being claimed here (in simple terms) is that FHFA was not acting as an independent regulator and in fact as an arm of the US Treasury in which case the government’s motion to dismiss cannot be granted as it means FHFA was in violation of HERA.  Depositions must happen as part of the discovery process. Because the government has dragged its heels in producing documents, the deadline for document discovery has been extended from March to June.

The objection above is simply another attempt to further delay proceedings in hopes a legislative solution to Fannie Mae is reached before this goes to trial.

I am of the opinion Sweeney, based on her earlier decisions sees through this and allows Fannie Mae depositions to proceed. The government before Sweeney has had very little success to this point. Even should they prevail here it is not an indicator of an outcome of the case, just notice that a resolution is being pushed out farther.

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Todd Sullivan is a Massachusetts-based value investor and a General Partner in Rand Strategic Partners. He looks for investments he believes are selling for a discount to their intrinsic value given their current situation and future prospects. He holds them until that value is realized or the fundamentals change in a way that no longer support his thesis. His blog features his various ideas and commentary and he updates readers on their progress in a timely fashion. His commentary has been seen in the online versions of the Wall St. Journal, New York Times, CNN Money, Business Week, Crain’s NY, Kiplingers and other publications. He has also appeared on Fox Business News & Fox News and is a contributor. His commentary on Starbucks during 2008 was recently quoted by its Founder Howard Schultz in his recent book “Onward”. In 2011 he was asked to present an investment idea at Bill Ackman’s “Harbor Investment Conference”.
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  1. Why Hasn’t One Person, in the US Congress or Senate, Stood Up and said, “No. We have been ‘HAD’; and, my constituency that voted directly for me to represent them, wants me to say ‘NO’ to him and the rest of You?”. I blame all leaders, both Houses and both sexes for not being true to those who they represent. The boundaries, limits and responsibilities of all voter elected individuals have been clearly crafted and etched in stone from Jay, Monroe, Madison, and the framers of all the rules, regulations and requirements for carrying out the will of the people, by the people and for the people. The Constitution of the USA is the bedrock of our success; not, any one single person. We have gone too far in promoting fear in today’s American Citizen warning our citizens that ISIS, mercenaries trained in the Carolinas and othe remote “Soldiers of Fortune” worldwide camps are ready to invade the US and paralyzethe electrical delivery system or poisin our waters. This is evil and mean. Yet, we open our arms to illegal immigrants arriving on our shores with a mandate to destroy the most generous people the world has ever known; and, provide all the benefits of citizenship while denying the same benefits to our people Mrs. PELOSI AND ATTY. WARREN.. Yet remember, we have not repaid our forgotten debts to the American Indian Civilization that kept this sacred North América in waiting for all of us for so long. Before we allow anybody into this country, we must pay our debt to our Elderly Citizens who live on thin funds to exist and stop stealing land and benefits from the survivors of a proud Indian Nation older then Western Civilization.. We, nor the President, nor Congress has the right or the permission of the American voter to prioritize not a single illegal or Afghanistani with benefits taken away from the American Worker or veteran. Hearing that our poverty to riches President had a strawto buy a mega house in Hawaii for his future living is as careless as Mr Ergotan’s hotel mansion built of the backs of Turkey’s poor, in his country. Why hide it, if you have earned honest money. Not a good example for anyone’s children or grandchildren, nor the promise of America to every law abiding citizen. Congressmen and Senator, please wake up. You are there at the will of the people and “In God We Trust”.

  2. I remember obama’s campaign speech, said
    “yes we can”
    yes we can…lie to people
    yes we can…stole people
    yes we can…do any we want any time we want
    yes we can…broke the law
    yes we can…

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