FNMA and FMCC preferreds. In search of the elusive 10 bagger.

[morningstar]

Were the Net Worth Sweep to be upheld as permissible under Delaware and Virginia law, a very troubling precedent would be set for those states’ corporate laws, for stockholders of corporations of those states, and for the mergers and acquisitions community as a whole, because such precedent would appear to extend equally to corporations not under conservatorship and without the federal government as their senior preferred stockholder, and thereby permit the directors of a Delaware or Virginia corporation unilaterally to contract away all of the net worth and profits of the corporation for all time to a single preferred stockholder.

 

how do you reject this argument?

 

Outside of fiduciary duty issues, it's not very clear to me that this would be at all troubling. Assuming that the board of directors (of this theoretical company not in conservatorship) did something like this, and assuming that it was capable of defending itself against fiduciary duty claims, why would it be objectionable? For instance, imagine a company facing a choice between (1) a net worth sweep and (2) bankruptcy, in which the equity is expected to be cancelled. Can you explain why a court would wish to foreclose option (1)?

[Guest cherzeca]

Were the Net Worth Sweep to be upheld as permissible under Delaware and Virginia law, a very troubling precedent would be set for those states’ corporate laws, for stockholders of corporations of those states, and for the mergers and acquisitions community as a whole, because such precedent would appear to extend equally to corporations not under conservatorship and without the federal government as their senior preferred stockholder, and thereby permit the directors of a Delaware or Virginia corporation unilaterally to contract away all of the net worth and profits of the corporation for all time to a single preferred stockholder.

 

how do you reject this argument?

 

Outside of fiduciary duty issues, it's not very clear to me that this would be at all troubling. Assuming that the board of directors (of this theoretical company not in conservatorship) did something like this, and assuming that it was capable of defending itself against fiduciary duty claims, why would it be objectionable? For instance, imagine a company facing a choice between (1) a net worth sweep and (2) bankruptcy, in which the equity is expected to be cancelled. Can you explain why a court would wish to foreclose option (1)?

 

preferred stockholders (generally) are entitled to no fiduciary duty. common stockholders are.  this is at the root of the statutory construction question of DLGC Section 151c.

 

the real point here though is that the language and structure of DGCL 151c requires the result. and that view is reinforced by the fiduciary duty that is owed to common but not preferred.

[Luke 532]

Good read from Fiderer: http://www.fidererongses.com/#!Is-AEI-Laying-Groundwork-For-A-Govt-3rd-Amendment-Exit-Strategy/tffln/569d3bef0cf2d42376d3c906

[Guest cherzeca]

real time streaming of DC circuit court of appeals arguments (re 4/15/15 perry arguments)

 

http://www.dccourts.gov/internet/appellate/oralargsaudio.jsf

 

[merkhet]

Joint Status Report pushed to the 28th

 

http://gselinks.com/Court_Filings/Fairholme/13-465-0282.pdf

[hardincap]

real time streaming of DC circuit court of appeals arguments (re 4/15/15 perry arguments)

 

http://www.dccourts.gov/internet/appellate/oralargsaudio.jsf

 

We should have a ruling on the delaware case before then, correct?

[Guest cherzeca]

real time streaming of DC circuit court of appeals arguments (re 4/15/15 perry arguments)

 

http://www.dccourts.gov/internet/appellate/oralargsaudio.jsf

 

We should have a ruling on the delaware case before then, correct?

 

ruling?  no

 

fhfa reply briefs due 2/16. i am guessing judge sleet wants oral argument and if he does, you might have that sometime in spring. but if he pulls a lamberth and foregoes oral argument, then i suppose it is possible. 

 

as to the fhfa reply brief, it will be interesting to see what they say re certification to the del/va supreme courts.  i expect they will say that del/va law doesn't apply since HERA preempts, but in its original brief, they go on to say that if there is no preemption, then del/va law doesn't prohibit NWS.  so i assume they will feel obliged to take a view on certification, to be consistent.  i think they would rather have a fed judge decide this than the del s ct (with their peer arguing to them for plaintiffs).

 

merkhet should advise as well here.

[merkhet]

Agree in all respects. Unless Steele moves for summary judgement, which is possible if the DE/VA certification comes back very strong, I would not bank on a ruling from Delaware by April 15.

 

We should be focusing more on when we will hear about the certification. IMHO, if that comes back in our favor (which is what I'm expecting), winning the Delaware case is a foregone conclusion.

[Guest cherzeca]

"We should be focusing more on when we will hear about the certification. IMHO, if that comes back in our favor (which is what I'm expecting), winning the Delaware case is a foregone conclusion."

 

i expect that certification ruling by sleet will accompany his ruling on fhfa's motion to dismiss, since he has to first rule on absence of federal preemption in order to find an issue that should be certified to state courts.  now, if he were to certify before he rules, that would be a huge tell that he will deny motion to dismiss.

[Mephistopheles]

I normally don't pay attention to the TH717 site, but if true, this seems significant:

 

http://timhoward717.com/2016/01/22/breaking-news-co-conspirator-jim-parrot-takes-the-fifth-in-depositon/#comments

 

I didn't know who this person was until I looked it up:

 

"Jim Parrott is a senior fellow at the Urban Institute and owner of Falling Creek Advisors, which provides financial institutions with strategic advice on housing finance issues.

 

Before joining Urban in 2013, Parrott served for several years in the White House as a senior advisor at the National Economic Council, where he led the team of advisors charged with counseling President Obama and the cabinet on housing issues. He was on point for developing the Obama administration’s major housing policy positions; articulating and defending those positions with Congress, the press, and the public; and counseling White House leadership on related communications and legislative strategy. He was previously counsel to Secretary Shaun Donovan at the Department of Housing and Urban Development, advising on a range of housing finance issues."

[doughishere]

michelle celarier - NYPost

 

 

 

MY natural inclination is to suspect she is referring to the blog post. Not totally sure....should make for some interesting reading in the next few weeks.

[Luke 532]

Not sure if this quote is accurate but perhaps cherzeca, merkhet, or other lawyers could chime in...

 

http://www.litigationandtrial.com/2013/04/articles/attorney/pleading-the-fifth-adverse-inferences/

"Thus, pleading the Fifth in a civil case in federal court is never helpful, is rarely harmless, and is typically very damaging — indeed, it’s often fatal to the party’s claims or defenses."

 

[Guest cherzeca]

Not sure if this quote is accurate but perhaps cherzeca, merkhet, or other lawyers could chime in...

 

http://www.litigationandtrial.com/2013/04/articles/attorney/pleading-the-fifth-adverse-inferences/

"Thus, pleading the Fifth in a civil case in federal court is never helpful, is rarely harmless, and is typically very damaging — indeed, it’s often fatal to the party’s claims or defenses."

 

i am more of a transactional guy than a litigator, but i find parrot's 5th while being deposed as a fact witness is interesting.  he obviously didn't want to answer the questions, and he didn't want to perjure, but you can only invoke the 5th if the testimony tends to incriminate yourself, not someone else.  now, until the motion to compel is granted, parrot's secrets remain secret, but if the emails/docs are compelled to be produced by sweeney, then parrot's tactic may come back to bite him.  but it certainly doesn't look good for someone advising the WH to plead 5th in a civil case in which he is only a fact witness.

[orthopa]

Not sure if this quote is accurate but perhaps cherzeca, merkhet, or other lawyers could chime in...

 

http://www.litigationandtrial.com/2013/04/articles/attorney/pleading-the-fifth-adverse-inferences/

"Thus, pleading the Fifth in a civil case in federal court is never helpful, is rarely harmless, and is typically very damaging — indeed, it’s often fatal to the party’s claims or defenses."

 

i am more of a transactional guy than a litigator, but i find parrot's 5th while being deposed as a fact witness is interesting.  he obviously didn't want to answer the questions, and he didn't want to perjure, but you can only invoke the 5th if the testimony tends to incriminate yourself, not someone else.  now, until the motion to compel is granted, parrot's secrets remain secret, but if the emails/docs are compelled to be produced by sweeney, then parrot's tactic may come back to bite him.  but it certainly doesn't look good for someone advising the WH to plead 5th in a civil case in which he is only a fact witness.

 

Dumb question but is a lawyer advising him to invoke the 5th with these questions? If so may not be as incriminatory as suggested or doesn't that matter?

[Guest cherzeca]

for sure he has been advised by counsel to plead 5th.  in fact, i am sure parrot will say to his dying day that he wanted to answer the questions but his lawyer advised against.

 

background to this may be the position of unguletti (sp?) who signed an affadavit for the fhfa motion to dismiss in perry that cooper & kirk has been saying for months now is false.  maybe parrot didn't see how he could be truthful and not really mess things up, and didnt want to be untruthful and be like unguletti.  moreover, the old "don't recall" wouldn't work as parrot has written alot about the time he was housing advisor to WH, so he has documented that he has good memory, and if he answered dont recall, then another reason for cooper & kirk to ask sweeney to release documents from privileges, to help refresh parrot's memory

[doughishere]

For fun. Chappelle Show - Fiiif Amedment

 

[hardincap]

DoJ says on record that Parrott actually did not invoke the 5th

 

[Guest cherzeca]

right.  i would not be surprised if DOJ lawyer attended depo and instructed parrot not to respond to questions relating to events in emails covered by DOJ claims of executive privilege (parrot was a party to some of these emails), and that th717 doesnt know difference (or much of anything), but that is only my speculation

[hardincap]

fwiw, according to a commenter its likely timhoward717 is affiliated with bill ackman. the commenter cites www.thetruthaboutvaleant.com and commingled twitter activity between the two handles (timhoward and valeant)

[muscleman]

right.  i would not be surprised if DOJ lawyer attended depo and instructed parrot not to respond to questions relating to events in emails covered by DOJ claims of executive privilege (parrot was a party to some of these emails), and that th717 doesnt know difference (or much of anything), but that is only my speculation

 

Can Parrot refuse to answer deposition questions by claiming executive privilege? I thought The executive privilege is meant to hide the truth from the public, but should be visible  to the plantiff lawyers. Otherwise how will the plantiff lawyers litigate properly if the defense simply claims everything under executive privilege?

[Guest cherzeca]

right.  i would not be surprised if DOJ lawyer attended depo and instructed parrot not to respond to questions relating to events in emails covered by DOJ claims of executive privilege (parrot was a party to some of these emails), and that th717 doesnt know difference (or much of anything), but that is only my speculation

 

Can Parrot refuse to answer deposition questions by claiming executive privilege? I thought The executive privilege is meant to hide the truth from the public, but should be visible  to the plantiff lawyers. Otherwise how will the plantiff lawyers litigate properly if the defense simply claims everything under executive privilege?

 

if parrot was asked about emails he received or sent while a member of WH staff, and those emails are subject to a claim of executive privilege with respect to a plaintiff production request (currently under a plaintiff motion to compel production) then DOJ can assert that privilege with respect to parrot's deposition answers to those questions

[Luke 532]

Reminder: Joint Status Report in Sweeney's courtroom due this Friday (29th).

[orthopa]

Reminder: Joint Status Report in Sweeney's courtroom due this Friday (29th).

 

I thought merkhet posted it was pushed to the 28th today?

[Luke 532]

Reminder: Joint Status Report in Sweeney's courtroom due this Friday (29th).

 

I thought merkhet posted it was pushed to the 28th today?

 

It was previously today and got pushed to tomorrow.  This was during the filings earlier this week when the gov't filed a motion, Plaintiffs responded within 90 minutes, and Sweeney granted the order the next day.  All under seal, of course.

[orthopa]

Reminder: Joint Status Report in Sweeney's courtroom due this Friday (29th).

 

I thought merkhet posted it was pushed to the 28th today?

 

It was previously today and got pushed to tomorrow.  This was during the filings earlier this week when the gov't filed a motion, Plaintiffs responded within 90 minutes, and Sweeney granted the order the next day.  All under seal, of course.

 

Shoot, ok thanks.