A week ago HousingWire first reported that former Fannie Mae CFO J. Tim Howard was hired by Fairholme Funds in their lawsuit against the U.S. Treasury, and now the government is arguing against allowing Howard access to 800,000 pages of discovery documents.
Attorneys for the federal government have argued that Howard should not get to serve as a consultant with access under the limited discovery a federal judge granted, arguing that Howard was forced out of Fannie in an accounting scandal, even though investor lawsuits against Howard were found to be without merit and his case with settled with the Securities and Exchange Commission.
Why either allegation should matter was not explained, since Fairholme is hiring Howard to unravel 800,000 pieces of documentation expected to be released during the discovery process.
Howard, as former chief financial officer for the GSE, is both highly knowledgeable about the inner workings of the institution and its inter-agency activities, and is regarded as an unbiased counselor who can decipher the information that’s revealed.
Attorneys for Treasury argued that because Howard owns some share of Fannie, he would be biased. Fairholme attorneys said in filings on Monday that Howard has agreed not to dispose of his shares until after completion of litigation.
Investors in the GSEs want the mortgage giants to pay shareholder profits it owes, but the GSEs are not doing that as part of the bailout agreement with the federal government.
After Fannie Mae and Freddie Mac were bailed out during the financial crisis and placed into conservatorship, all profits were directed back to the U.S. Treasury.
Now that the government has been paid back, investors want their stake and their rights upheld.
Consumer advocate Ralph Nader, CapWealth Advisor CEO Tim Pagliara, investor Carl Icahn, and dozens of GSE shareholders from 20 states have joined together in this campaign under the banner Investors Unite. Fairholme is one of several hedge funds with GSE holdings.
A copy of the motion to allow Howard access can be read here.
A source with Investors Unite told HousingWire Monday in Washington that the government is trying to drag out discovery and the legal case as long as possible.