DSNews The homepage of the servicing industry
Florida-based Fairholme Funds, one of the largest investors in Fannie Mae and Freddie Mac, has filed the public version of its request that the Court of Federal Claims order the federal government to turn over documents that the company says are being unlawfully withheld in its case against the government.
In February 2014, the Court of Federal Claims authorized Fairholme to receive documents from the federal government related to the “Net Worth Sweep,” or the process of sweeping GSE profits straight into the Treasury. According to a company statement, the Department of Justice has over the past two years employed “overbroad and otherwise improper claims of privilege to withhold some of the most important documents in this case”‒‒particularly documents that show the government’s case is based on outright falsehoods.
The filing also claims that the federal government’s stalling is putting the GSEs in an untenable position. The filing, according to Fairholme’s founder and chief investment officer, Bruce Berkowitz, “challenges the latest example of foot-dragging and evasion by those attempting to defend the government’s indefensible decision to enrich itself by putting Fannie and Freddie on the permanent brink of insolvency.”
Fairholme sued the government in 2013 over what had then been a yearlong sweep of GSE profits into the Treasury. The practice began as the result of an amendment to the original 2008 bailout agreement. It also happened to begin in 2012, which was the first profitable year for the GSEs since the bailout.
According to the filing, Fairholme is accusing the federal government of essentially taking private property for public use without just compensation, a practice forbidden by the Fifth Amendment of the U.S. Constitution.
“It is outrageous that the government has unjustifiably withheld key documents at every turn, only to hand some of them over at the eleventh hour when challenged,” Berkowitz said. “The government’s persistent obfuscation has the purpose and effect of inflicting economic harm on our tens of thousands of shareholders and other innocent investors.”
