The New York Times Company has filed a motion with the U.S. Court of Federal Claims to intervene and to have the "protected information" designation removed from the testimony of key government officials in Fairholme Funds' GSE profits lawsuit.
The newspaper has asked the Court to remove the protected information tag from the depositions of Edward DeMarco, who was the director of the Federal Housing Finance Agency from 2009 to 2014, and Mario Ugoletti, who was a senior official with the U.S. Department of Treasury in 2008 when the government bailed out Fannie Mae and Freddie Mac at a combined price of $187.5 billion.
The court filing says both DeMarco and Ugloletti played a "critical role" in the government's efforts to stabilize the economy by placing Fannie Mae and Freddie Mac under the FHFA's conservatorship in September 2008.
"Through this action, the Times seeks to intervene and be heard on the question of the public's access to documents arising from discovery in this action," wrote David E. McCraw from the Times' Legal Department in the filing. "News organizations are routinely permitted to intervene and be heard on issues involving public access to judicial proceedings and documents, including challenges to discovery protective orders, pursuant to Rule 24 of the Federal Rules of Civil Procedure, either permissively, or , at times, as a matter of right."
Florida-based mutual fund Fairholme Funds, one of the GSEs' largest investors, sued the government in July 2013 over the sweeping of GSE profits into Treasury – a practice which began in August 2012 after an amendment to the original bailout agreement. The year 2012 was the first year of profitability for the GSEs after the bailout. Fairholme CEO Bruce Berkowitz believes the sweeping of GSE profits shortchanges investors.
A judge in the U.S. District Court of the District of Columbia dismissed Fairholme's suit and a similar suit by hedge fund Perry Capital in September 2014, but a judge in the federal claims court revived Fairholme's suit in January 2015.
McCraw also wrote in the filing that the Times believes the government has failed to show "good cause" for sealing the DeMarco and Ugoletti depositions. To show good cause to keep the documents sealed under law, parties must show that disclosure of the information "will cause a clear and serious injury" via a "particular and specific demonstration of fact, as distinguished from stereotyped and conclusory statements." The filing by the Times contends that the government has not done this – and that a confidentiality order does not trump the requirement to show good cause to keep the documents sealed.
"The courts have repeatedly recognized that disclosure of discovery is particularly appropriate when a lawsuit sheds light on the performance of government agencies and entities – which is precisely the case here," McCraw said in the filing.
The filing states that the public's interest in the underlying facts of the Fairholme case are "undeniable."
"The litigation has deep roots in the government's decision to provide an emergency bailout to Fannie Mae and Freddie Mac in the midst of a grave threat to the national economy," McCraw wrote. "The case directly addresses how the government is going about recouping public funds used in the bailout and whether other investors are being treated lawfully. The government should not be able to hide from the public – voters and taxpayers – the facts that were central to the decisions that the government made as part of the far-reaching effort to safeguard the U.S. economy."
Click here to see a copy of the motion filed by the New York Times.