U.S. can withhold some documents in Fannie, Freddie case: court
Reuters
Published Jan 30, 2017 02:03PM ET
U.S. can withhold some documents in Fannie, Freddie case: court
By Jonathan Stempel
(Reuters) - A federal appeals court on Monday narrowed the range of documents that the U.S. government must turn over to investors suing over its August 2012 decision to seize the profits of mortgage giants Fannie Mae (PK:FNMA) and Freddie Mac (PK:FMCC).
The Federal Circuit Court of Appeals said four documents could be withheld from Fairholme Funds and other investors on the basis of presidential privilege, and four other documents were protected by privilege of the deliberative process. It said eight other disputed documents were not privileged.
Monday's decision is a mixed ruling for investors suing the government over its sweeping of the mortgage companies' profit to the U.S. Treasury Department, which they called an unconstitutional taking of private property.
Fairholme and its lawyer Charles Cooper were not immediately available for comment. A spokeswoman for U.S. Department of Justice said the agency is reviewing the decision.
The government seized Fannie Mae and Freddie Mac in September 2008 as mortgage losses mounted, and put them into a conservatorship under the Federal Housing Finance Agency.
Both have since become profitable, and according to court papers have returned roughly $68 billion more to the government than they drew down during the financial crisis.
Fairholme, overseen by Bruce Berkowitz, said such profit belonged to stockholders such as itself. Its 2013 lawsuit focused on the companies' preferred stock, which threw off 10 percent dividends before being eliminated.
In October, Judge Margaret Sweeney of the Court of Federal Claims ordered the government to turn over 56 documents sampled from roughly 12,000 it had withheld on privilege grounds.
The Obama Administration's appeal focused on 16 of these documents. It said Sweeney's ruling "casts a cloud" over whether all 12,000 documents were properly withheld, and in practice could chill White House deliberations on sensitive subjects.
Writing for the appeals court, Circuit Judge Kathleen O'Malley said Sweeney did not abuse her discretion in ordering most of the disclosures.
Citing the 1974 Supreme Court decision in the Nixon tapes case, however, O'Malley said disclosing documents subject to presidential privilege could impede the president and his advisers from shaping policy "in a way many would be unwilling to express except privately."
O'Malley also said Fairholme showed "no particular need" for the four documents covered by that privilege.
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The other four documents ordered withheld concerned proposed legislation to wind down Fannie Mae and Freddie Mac, draft memoranda outlining housing reform proposals, and an internal FHFA presentation on deferred tax assets.
The case is Fairholme Funds Inc et al v. U.S., U.S. Federal Circuit Court of Appeals, No. 2017-104.
Written By: Reuters
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