What Did Former Fannie Mae CFO McFarland Reveal???

What Did Former Fannie Mae CFO McFarland Reveal???
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What Did Former Fannie Mae CFO McFarland Reveal??? by Todd Sullivan, ValuePlays

Judge Sweeney has ruled in favor of Fairholme and granted them a deposition of Egbert Perry (the government fought this).  One can only guess but it is striking that Cooper claims the government is concealing information…..

Would love to be a fly on the wall in these depo’s.

From the complaint (XXXXX is redacted in formation)

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The Companies have produced a substantial amount of the important evidence that has come to light through discovery in this case. Perhaps most significant is the deposition testimony of former Fannie Mae CFO Susan McFarland, XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX. Transcript of Deposition of Susan McFarland 45:5–8 (“McFarland Tr.”), attached as Exhibit 2, A010; id. at 59:15–60:1, A014, 158:7–10, A017, 164:6–12, A018. This information is of critical importance to the issues on which this Court authorized discovery, and the XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX did not emerge when Plaintiffs deposed Government officials who were involved in the Net Worth Sweep or in the documents the Government has produced in response to Plaintiffs’ discovery requests. While Ms. McFarland’s deposition revealed extremely important information that the Government might have otherwise been able to conceal, her deposition was also necessarily limited in scope. Ms. McFarland only joined Fannie Mae as an employee in mid-2011, XXXXXXXXXXXXXXXXXXXXXX and lacked a Board member’s perspective on the factual issues before the Court.

Full Filing: Fairholme Argument for Perry Depo

Also, was on the Investor’s United conference call today with Judge Steele as he outlined his arguments in his lawsuit. There wasn’t anything earth shattering said (he will answer the government’s motion to dismiss filing in full in Jan with his own). He did walk through his thought process and it was great to hear it nonetheless.  Hopefully a transcript becomes available.

Notes from reader Mark:

Paraphrased quotes from Steele:

“I can’t remember being more excited about representing a case.”

“Let me ease any concerns… nothing in any of the briefs by the government could be considered a surprise or unexpected.  The arguments were very predictable.  Nothing we’ll have a hard time responding to.”

“The government set up a standard they must comply with and then they violate their own standard.  You’ll see this clearly in our response briefs.”

“We will dispute each and every claim the government made, there are no concessions* to be made.” *I’m not sure if “concessions” was the word he used, but that was the idea.  I know specific words are very important when it comes to legal matters but I didn’t catch the exact word, although it may very well have been “concessions.”

“Very short in their responses to Delaware and Virginia law.  They didn’t spend much time on it because they want the court to focus on dismissing the case outright.”

Upcoming Court Events (according to Steele):

-January 16th is deadline for Steele’s written reply to each government argument.

-Then a reply from the government shortly after that.

-Then it’s in Federal District Court Judge Sleet’s hands.


Christian Herzeca (attorney that covered the MBIA case so well on his blog a few years ago) asked a question but I didn’t write it down as it didn’t strike me as material.  It probably was material given Herzeca’s profession is law and mine is not, but I didn’t write it down.

Joe Light (WSJ) asked if Steele was open to asking for damages instead of just the 3rd Amendment complaint.  Steele responded (paraphrased) “we have the option to amend our complaint for damages.  If we were to do that I’d hold my response until then.”

Roger Parloff (Fortune article author) asked if Steele represents both preferred and common shareholders.  Steele responded (paraphrased) “we represent our clients Hindes and Jacobs and each has held both.”

Overall, I thought it was a very good call.  Steele seems confident.

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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 RealMoney.com 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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