Ackman files second lawsuit against US government

Ackman files second lawsuit against US government
Bill Ackman, chief executive officer and portfolio manager of Pershing Square Capital Management, L.P., speaks at the Ira Sohn Investment Conference in New York, May 8, 2013.

Activist Bill Ackman's Pershing Square Capital Management LP filed its second lawsuit in two days against the US government over bailout of Fannie Mae and Freddie Mac, court documents show.

In Friday's complaint with the US District Court, Pershing Square alleged that the Department of the Treasury illegally seized tens of billions of dollars in Fannie and Freddie profits.

Pershing Square, the largest shareholder of both the mortgage companies, said in the complaint that it was told the Fannie and Freddie stockholders no longer have fundamental shareholders rights.

Fannie's and Freddie's conservator, Federal Housing Finance Agency (FHFA), denied "written demands by Pershing Square to the companies' boards of directors for a books and records inspection", according to the complaint.

In the second lawsuit, Pershing suggests the mortgage companies' dividends being paid to the Treasury should be shared among other common shareholders.

Three retirees who own Fannie Mae stock have joined as plaintiffs of the lawsuit.

In a complaint filed on Thursday with the US Court of Federal Claims in Washington, D.C., Pershing accused the government of violating the Fifth Amendment of the US Constitution by taking private property for public use without just compensation.

Though the lawsuits raise different legal theories and are in different courts, they are both designed to enable Ackman to recoup sums for the depressed value of his Fannie Mae and Freddie Mac shares.

Pershing disclosed last November it had invested close to a half-billion dollars for common share stakes of 9.98 per cent in Fannie Mae and 9.77 per cent in Freddie Mac.

The alleged illegal "dividend sweep" were under way before this disclosure.

In July 2013, investors such as hedge fund firm Perry Capital LLC and Bruce Berkowitz's Fairholme Capital Management LLC, for example, sued the government over Fannie and Freddie, which were bailed out in September 2008 amid mounting mortgage losses.

Neither the Treasury Department, nor the FHFA were immediately available for a comment.

Jones Day represents Pershing and the three individual shareholders of Fannie and Freddie.

The case is Rafter et al v. Department of the Treasury et al, US District Court for the District of Columbia.

 

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