Depositions/Emails Unraveling Government’s Defense (Redacted Documents Enclosed)


Fairholme is fighting to have depositions in the GSE litigation ($FNMA $FNMAS) made public. There are several arguments for it (1st Amendment etc) but for our purposes we are going to focus on “what” the government is so desperately trying to hide:

In Mario Ugoletti’s (FHFA) and Anne Eberhardt’s (Grant Thornton) depositions, they made several statements that directly contradict previous statements made by the government.  Fairholme claims these statements not only undercut but directly contradict the arguments the Government made before Lamberth, arguments his final decision to dismiss was based on and they argue the Appeals Court should see them.


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The government argued the NWS was necessary because the GSE’s were in a “death spiral” in which they were unable to pay the 10% dividend and would have to continually borrow from the government to pay it making the future payments only higher. They argued that the payment in kind provision was a “penalty” and Lambreth bought into it in his decision ruling the GSE’s were in fact in the claimed “death spiral” and the NWS was justified. It would seem an email from Ugoletti counters the “penalty” claim.
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The government also argues that at the time the NWS was enacted, they had not yet even considered the fact that the DTA’s will be being reversed so causing over $100B to flow back to the Treasury. Again, documents uncovered directly counter that claim.

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This is the bigger. a main crux of shareholders argument is that FHFA was not acting as regulator but as a rm of the government, specifically Treasury. If that is indeed true, then FHFA violated HERA and their actions are illegal. Treasury/FHFA of course argue that is not true.  Lamberth ruled there was no evidence Treasury directed the action at FHFA and thus whatever FHFA did was then ok. I’ve said since day 1 Lamberth’s decision was slovenly in that he abdicated his responsibilities in these cases to Sweeney rather than conduct discovery to actually find out if there was evidence.  Again, documents uncovered suggest Treasury was in fact in control over what was happening, a direct violation of HERA

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Further the value of the commitment to the GSE’s was claimed to be “incalculably large” by the defense. Funny but it turns out Treasury and FHFA had several calculations for the value of it under different scenarios.

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I think these examples are bringing to light what many of us had assumed but not been able to prove for some time, the government, in its defense was less than honest. These documents and depositions are knocking one leg after another out from under the defense table.

Full Filing (pdf)

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