motion to disclose fannie mae documents 022012

7/31/2019 Motion to Disclose Fannie Mae Documents 022012

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UNITED STATES DISTRICT COURT

DISTRICT OF COLUMBIA

In re Federal National Mortgage

Association Securities, Derivative andERISA Litigation

MDL NO. 1668

In re Fannie Mae Securities Litigation Consolidated Civil Action No.: 1:04-CV-01639

Judge Richard J. Leon

INDIVIDUAL DEFENDANTS JOINT MEMORANDUM IN OPPOSITION TO

INTERVENOR FHFAS MOTION FOR PROTECTIVE ORDER AND

THIRD PARTY HUD-OIGS NOTICE OF DISPUTE REGARDING ITSMATERIAL REMAINING UNDER SEAL

Case 1:04-cv-01639-RJL Document 1010 Filed 02/27/12 Page 1 of 21


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TABLE OF CONTENTS

I. INTRODUCTION............................................................................................................. 1

II. THE PUBLIC INTEREST WARRANTS PUBLIC ACCESS ..................................... 3

A. This Is a Highly Public Proceeding, and the FHFA/HUD-OIG MaterialsAre Presumptively Public ....................................................................................... 3

B. This Litigation and the Documents in Question Pertain to a Matter ofUnique Public Interest............................................................................................. 5

C. What FHFA Wants to Keep from the Public Is Information That Either IsAlready Publicly Available, in Sum and Substance, or Explicitly RebutsFHFAs Public Claims............................................................................................ 6

III. UNDER ANY STANDARD, THE FHFA/HUD-OIG MATERIALS MUSTREMAIN PUBLIC.......................................................................................................... 10

A. The FHFA/HUD-OIG Materials Are Not Privileged ........................................... 10

B. There Is No Good Cause for a Protective Order................................................... 12

C. Even in the Face of Much Weightier Privacy Interests, the Stevens ReportRequired Disclosure.............................................................................................. 14

IV. THE PRIVACY ACT AND INSPECTOR GENERAL ACT DO NOT BARTHE COURT FROM PERMITTING PUBLIC DISCLOSURE OF ANY OF

THE FHFA/HUD-OIG MATERIALS.......................................................................... 17

CONCLUSION ........................................................................................................................... 18



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TABLE OF AUTHORITIES

Cases

Alexander v. FBI, 186 F.R.D. 71 (D.D.C. 1998) .......................................................................... 12

EEOC v. Natl Childrens Ctr, 98 F.3d 1406 (D.C. Cir. 1996) .............................................. 12, 13

In re Application of Natl Broad. Co., 653 F.2d 609 (D.C. Cir. 1981)......................................... 12

In re North, 16 F.3d 1234 (D.C. Cir., Spec. Div., 1994) ........................................................ 15, 16

In re Special Proceedings, Misc. No. 09-0198, 2012 U.S. Dist. LEXIS 15656 (D.D.C.Feb. 8, 2012) .................................................................................................................... passim

In re Subpoena Served Upon Comptroller of the Currency, 967 F.2d 630 (D.C. Cir. 1992)....... 11

United States v. Hubbard, 650 F.2d 293 (D.C. Cir. 1980) ........................................................... 12

United States v. Microsoft Corp., 165 F.3d 952 (D.C. Cir. 1999)................................................ 12

Statutes5 U.S.C. 552a(b)(11).................................................................................................................. 17

Rules

Fed. R. Civ. P. 26(c) ....................................................................................................................... 4

Fed. R. Civ. P. 5.2........................................................................................................................... 4

Web Resources

http://www.americanbanker.com/media/pdfs/regulatory/HUD%20IG%20Report%20on%20OFHEO.pdf ............................................................................................. 4

http://www.fhfa.gov/webfiles/1215/ar61402.pdf............................................................................ 7



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I. INTRODUCTION

Now that it is finally time for the Court to assess the merits of the very public accusations

made by plaintiffs and OFHEO (now FHFA) against the Defendants, FHFA and HUD-OIG ask

this Court to keep exculpatory information under seal and, by implication, to hold closed

proceedings related to summary judgment. However, this Courts proceedings are presumptively

public. FHFA and HUD-OIG must meet a heavy burden before they may keep exhibits from

public view and before they may justify closed proceedings. Indeed, they must show

extraordinary circumstances. FHFA and HUD-OIG do not, and cannot, come close to making

such a showing here.

OFHEO was singularly responsible for makingpublic the subject matter of this lawsuit.

And FHFA, by its own admission, has no problem with the public use of the information at issue

at trial, should trial be necessary. There is no legitimate reason for the Court to keep from the

public at this stage of the litigation all of the information pertaining to subject matters that

OFHEO itself publicized and certainly no legitimate reason to do so when the agency does not

object to the public use of the information at the trial stage.

Moreover, much of the information about which FHFA complainsnamely, information

reflecting OFHEOs approval of Fannie Maes FAS 133 accounting and subsequent politics

inside the agency that led to its improper conduct toward Fannie Mae and its shift in position on

FAS 133is, by and large, already public. OFHEO released a public report in 2002 describing

its approval of Fannie Maes FAS 133 policy, then publicly backtracked on that approval in 2004

and 2006 in the deliberately publicly released reports of the Special Examination. Likewise, an

Inspector General report on the disturbing politics that plagued OFHEO has been publicly

available online for nearly seven years. That report also contains much of the remaining

information FHFA seeks to keep secretthe identities of OFHEO employees and the contents of



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their testimony. Any objections that FHFA had to the public disclosure of that information are

sorely late.

At bottom, FHFA seeks to keep the information at issue under seal simply because the

information contradicts what the agency has already put in the public domain or is otherwise

unflattering to the agencyit exposes the full degree to which its predecessor knew of and

approved the accounting at issue, it exposes the full degree to which OFHEOs Special

Examination reports, upon which this action is based, were driven by politics, and it exculpates

the Individual Defendants from OFHEOs accusations. The mere fact this information is

contradictory to prior public statements or unflattering to OFHEO provides no basis to keep

matters under seal.

Now, more than ever, the affairs of Fannie Mae and its regulator are of public interest.

Without public disclosure of the materials that FHFA and HUD-OIG seek to keep under seal

until trial (FHFA/HUD-OIG materials), the public will have no way of assessing how its

public officials acted when they thought they could get away with it.1 The public will have no

way of assessing how the actions of OFHEO created or perpetuated the events at issue in this

litigation. That result is not fair to the Individual Defendants, nor to the public.2

As Judge Sullivan recognized this month in ordering the public release of the Report of

1 FHFAs Motion for a Protective Order, Dkt. 1004, herein referred to as FHFA Mot., sought to keep sealed all orportions of 27 exhibits cited in various Declarations supporting Defendants or Plaintiffs summary judgmentpleadings. FHFAs Supplement to Motion for a Protective Order, Dkt. 1008, herein referred to as FHFA Supp.Mot., withdrew two documents from the request to seal, added an additional document, and clarified FHFAsrequest to seal as to one document.

HUD-OIGs Response to Feb. 2, 2012 Order of the Court and Notice of Dispute Regarding Its MaterialsRemaining Under Seal, Dkt. 1003, herein referred to as HUD-OIG Not., failed to identify the exact documentsthat HUD-OIG seeks to keep under seal. HUD-OIGs Supplemental Memorandum, Dkt. 1007, herein referred to asHUD-OIG Supp. Mem., similarly fails to identify the exact documents at issue. Based on broad descriptions inthe Notice, it appears that all documents that HUD-OIG seeks to seal would be encompassed within the documentsthat FHFA also seeks to seal.2 This opposition is filed by the Individual Defendants, Franklin D. Raines, J. Timothy Howard, and Leanne G.Spencer. KPMG, in a separate filing, adopts the arguments in this motion. Plaintiffs have also authorized theIndividual Defendants to represent agreement by plaintiffs that the disputed materials should be publicly disclosed.



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Investigation into government actions in the Sen. Stevens prosecution, withholding that Report in

the face of the partial story already in the public domain would be the equivalent of giving a

reader only every other chapter of a complicated book, distorting the story and making it

impossible for the reader to put in context the information provided. The First Amendment, the

public, and our system of justice demand more. In re Special Proceedings, Misc. No. 09-0198,

2012 U.S. Dist. LEXIS 15656, at *6-7 (D.D.C. Feb. 8, 2012). Judge Sullivans words ring true

here as well. The Court should deny FHFA and HUD-OIGs requests for a protective order over

the documents at issue.3

II. THE PUBLIC INTEREST WARRANTS PUBLIC ACCESS

A. This Is a Highly Public Proceeding, and the FHFA/HUD-OIG Materials Are

Presumptively Public

It is difficult to imagine how the last seven years of this saga could have been more

public. OFHEO announced the Special Examination of Fannie Mae with much fanfare. Reports

of the Special Examination were publicly released by OFHEO, exposing Defendants not only to

litigation but also to public ridicule, by name. OFHEO press releases and press conferences

abounded. Plaintiffs publicized the resulting litigation against Defendants. Congress has called

hearing after hearing to publicly investigate the conduct of Fannie Mae, Defendants, and

Defendants counsel.

Particularly relevant to the materials at issue here, in 2004 HUD-OIG investigated the

actions of OFHEO regarding its oversight and examinations of Fannie Mae. HUD-OIGs

resulting Report was made, and remains, public today on numerous websites, with only limited

redactions. See, e.g., http://www.americanbanker.com/media/pdfs/regulatory/HUD%20IG%

3 FHFA and HUD-OIG reference, but do not actually detail or attach, the protective order they seek from the Court,which limits Defendants ability to respond to their motions. Defendants are treating the requested protective orderas being one that bars the filing of the FHFA/HUD-OIG materials, in their current form, on the public docket, butwhich would not bar their use at trial. See FHFA Mot. at 6.



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20Report%20on%20OFHEO.pdf.

FHFA and HUD-OIG conveniently ignore one of the basic tenets of the American justice

system. Information in a public proceeding is presumptively public. The FHFA/HUD-OIG

materials must be released to the public unless there is some strong, legitimate reason, good

cause, to keep them sealed. Fed. R. Civ. P. 5.2, 26(c). In the face of the reams of material about

the subject matter of this litigation that are and for years have been public, including material

that FHFAs predecessor itself made public, there is no reason to permit FHFA to keep certain

documents of its choosing under seal, simply because the agency does not like them.

Judge Sullivan similarly recognized the fundamental unfairness of blocking the public

disclosure of key information necessary for the public to fully understand a public proceeding:

In July 2008, attorneys in the Public Integrity Section of the Department ofJustice indicted apublic official for allegedly failing to report gifts on hispublic disclosure forms. The attorneys then tried the defendant in the mostpublic manner possible, and when they obtained a guilty verdict, they held apress conference to proclaim victory to thepublic. As a result of thatverdict, thepublic official lost his bid for re-election, which tipped thebalance of power in the United States Senate.

Meanwhile, in the face of serious and mounting allegations of prosecutorialmisconduct throughout the trial and post-trial proceedings, the attorneysrepeatedly represented to the Court and to thepublic that there was nowrongdoing and no cause to question the integrity of either the indictmentor the verdict. Only when faced with uncontroverted evidence that theattorneys had committedBrady violations did the government come beforethe Court and publicly move to dismiss the indictment and vacate theverdict. And only at that point did the government seek to turn thispublicproceeding into a private one, assuring the Court that it would investigatethe prosecutors internally through its confidential Office of ProfessionalResponsibility process.

In re Special Proceedings, 2012 U.S. Dist. LEXIS 15656, at *4-5.

The principles espoused by Judge Sullivan in that criminal proceeding are no less

applicable here. OFHEO chose to make this a matter of public interest. And only when it

became clear that Defendants had uncovered evidence showing OFHEOs own past misdeeds,



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did FHFA backpedal and attempt to turn thispublic proceeding into a private one. Id. at *5.

B. This Litigation and the Documents in Question Pertain to a Matter of Unique

Public Interest

The public interest in the information at issue is not merely academic. The public has a

lot invested in Fannie Mae, this litigation, and the events that led to this litigation.

The subject of this litigation is a government sponsored enterprise critical to the nations

housing market, the executives of which were publicly accused of wrongdoing.

The resulting litigation has been funded by the taxpayers since 2008. A large portion of

those fees were incurred because Defendants were forced to deal over and over again with the

obstacles created by OFHEO and FHFA with regard to documents showing OFHEOs

knowledge and improper actions. The public also paid for the HUD-OIG investigation into

OFHEOs actions against Fannie Mae.

The GSEs were taken over by the federal government in September 2008. The federal

Treasury has sunk, by FHFAs own admission, nearly $200 billion in taxpayer money (FHFA

Mot. at 6), into the GSEs since that time.

Judge Sullivan, again, could have been speaking about this litigation when he noted the

significance of the publics financing of the very proceedings that were now sought to be kept

from the public:

[T]he public bore the cost not only of the Stevens trial and post-trialproceedings, which resulted in the government seeking permission todismiss the indictment with prejudice and vacate the verdict, but also thecosts associated with Mr. Schuelkes investigation, and the costs associated

with the subject attorneys legal representation throughout thatinvestigation. It would be a disservice to the public to require the public tobear these costs, only to deny it the right to access the previouslyundisclosed facts relevant to the public trial of Senator Stevens anduncovered by Mr. Schuelkes investigation.

In re Special Proceedings, 2012 U.S. Dist. LEXIS 15656, at *33-34 (citations omitted). There is



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no basis in litigation of this profile, concerning matters of such significant public interest, to keep

documents under seal simply because a government agency is concerned that they are

unflattering.

C. What FHFA Wants to Keep from the Public Is Information That Either Is

Already Publicly Available, in Sum and Substance, or Explicitly Rebuts

FHFAs Public Claims

FHFA claims it is merely seek[ing] to protect from public disclosure documents that

could damage the FHFAs on-going intra-Agency communications and communications with its

regulated entities. FHFA Mot. at 6. Yet, as with the Stevens Report, what FHFA actually seeks

to protect from public view is information that puts the lie to OFHEOs past public claims

about the nature and content of its regulation and oversight of Fannie Mae in the areas relevant to

this litigation. And even more damaging to FHFAs desire for secrecy is the fact that the sum

and substance of most of the information contained in the FHFA/HUD-OIG materials, is already

public. It also bears mention that most of the documents at issue were created seven or more

years ago. FHFAs claim that the sky would fall if these documents see daylight, by somehow

undermining communications essential to the Nations economy (id. at 6), requires little

response. Of similar caliber is FHFAs claim that communication between it and its regulated

entities would be somehow harmed (id. at 9), when FHFA, as Fannie Maes conservator, is itself

Fannie Maes management.

The FHFA/HUD-OIG materials can be divided into three categories.4

(1)Materials related to OFHEOs knowledge of the FAS 133 standard, and how the

GSEs were implementing FAS 133. (Tabs 1-9, Tab 16, Tab 18).

These FAS 133 materials include documents authored by OFHEO employees related to

the GSEs implementation of FAS 133; transcripts of depositions of OFHEO employees

4 Defendants will not burden the Court with a document-by-document analysis of the FHFA/HUD-OIG materialswhere a categorical analysis is sufficient. This approach also permits thepublic filing of Defendants Opposition.



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testifying about the OFHEO FAS 133 documents and OFHEOs knowledge of the GSEs

implementation of FAS 133; and expert reports referencing the OFHEO FAS 133 documents.

OFHEOpublicly claimed it had no experience or expertise dealing with FAS 133. Yet

the OFHEO FAS 133 materials show the exact opposite. And OFHEO itself discussed its

oversight of Fannie Maes FAS 133 implementation in itspublic Report to Congress in 2002.

Seehttp://www.fhfa.gov/webfiles/1215/ar61402.pdf. The OFHEO FAS 133 materials that

FHFA seeks to keep secret will correct and fill in the incomplete story that OFHEO later told the

public. FHFAs desire to protect its inaccurate public statements cannot trump the publics right

to know what information its regulators actually had despite self-serving protestations of

ignorance.

FHFA objects that the FAS 133 materials show only the personal opinion[s] of an

Agency employee (FHFA Mot. at 16), and reflect[] open debate of alternative approaches, the

production of which would inaccurately reflect the views of OFHEO (id. at 17). The problem

is that OFHEO publicly stated, and plaintiffs have echoed, that there is only one way to view

FAS 133, and that Fannie Mae did not follow that one true path. The FAS 133 materials, by

FHFAs own admission, show that in reality even OFHEO employees were discussing the

permissibility of various methods for complying with FAS 133. And some of those so-called

opinions became the agencys official position. That reasonable people had reached different

conclusions even within OFHEO, and believed that open debate about FAS 133 was possible

and even required, shows why these communications are deeply relevant to this litigation and to

the publics ability to understand what didand did nothappen at Fannie Mae.

(2)Materials related to OFHEOs improper motivation, actions, and attitudes, both

public and private, toward Fannie Mae and Freddie Mac. (Tabs 10-16, Tab 21, Tab 23).

These materials showing improper OFHEO conduct include e-mails sent between



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OFHEO employees, or to external parties, reflecting improper motivations, actions, and attitudes

toward the GSEs; notes taken during OFHEO presentations discussing improper conduct toward

the GSEs; transcripts of depositions of OFHEO employees testifying about the improper conduct

e-mails and notes; and expert reports referencing OFHEOs improper conduct.

Where OFHEOpublicly claimed that it had conducted examinations of Fannie Mae

dispassionately and with no stake in the outcome, the improper conduct materials instead show

the prejudicial manner in which the Special Examination was conducted. The improper conduct

materials show OFHEOs strategy of using the press to attack and pressure the GSEs, as well as

the improper pressure brought by senior OFHEO officials on the OFHEO employees conducting

the Special Examination. Moreover, much of the information about OFHEOs improper actions,

which FHFA now seeks to keep out of the public view, is already widelypublicly available

through the publicly posted HUD-OIG Report.

(3)Materials related to the 2004 HUD-OIG investigation of OFHEOs improper

motivation, actions, and attitudes toward Fannie Mae. (Tabs 16-17, Tab 19, Tab 21).

These HUD-OIG investigation materials include a HUD-OIG memorandum summarizing

one of its interviews of OFHEO employees; transcripts of depositions of OFHEO employees

testifying about what they told HUD-OIG during its investigation; and expert reports referencing

what OFHEO employees told HUD-OIG.

FHFA objects that the names of the people who cooperated with HUD-OIGs

investigation cannot be released publicly because those identities are protected and release of the

information would cause reputational harm to the witnesses and targets of the investigation,

and deter future cooperating and confidential witnesses . . . [who] would not be reasonably

assured of anonymity. FHFA Mot. at 24. To the extent that any harm or deterrence would be

worked by the disclosure of the identity of the OFHEO witnesses, that result can be laid at HUD-



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OIGs own feet. The HUD-OIG Report is, and has been, publicly available, as even FHFA

admits. FHFA Mot. at 24. The HUD-OIG Report itself contains the identities of almost all of

the individuals who testified to HUD-OIG. Those identities, therefore, are already public. There

simply is no basis to seal materials on the ground that they reveal the identities of OFHEO

employees who cooperated with HUD-OIG, where those identities are already public.5

Nor is there any merit to the argument that the OFHEO employees would face retaliation

for their cooperation with HUD-OIG, or that future employees would be deterred from

cooperating with HUD-OIG. Because their identities are almost all already public, the fact of the

employees cooperation is already known to their superiors (and the only OFHEO employee

whose identity is non-public was deposed in this case and would be called to testify publicly at

trial to these very issues). Moreover, the officials who would supposedly be deterred from future

cooperation are government officials. Judge Sullivan rejected the exact same argument that

FHFA now proffers:

[B]ecause the subjects are government attorneys, as were most of the otherwitnesses, the Court assumes that the risk that these individuals would beless likely to testify fully and frankly or that they would be open toretribution as well as to inducements is minimal, regardless of the level ofsecrecy afforded by Mr. Schuelkes investigation.

In re Special Proceedings, 2012 U.S. Dist. LEXIS 15656, at *53-54.

Regarding the content of the HUD-OIG investigation materialsprimarily information

that OFHEO employees gave to HUD-OIGFHFA complains that public disclosure of what

5 The similarities to the Stevens case are again noteworthy. Judge Sullivan found it telling that:

[T]he identity of the subjects was known from the outset of the investigation, the mattersunder investigation were largely known to the public from the outset and arose from thesubject attorneys conduct during the proceedings in a highly-publicized criminal trial,and some of the subject attorneys have themselves made statements to the mediaregarding Mr. Schuelkes investigation. Under these circumstances, the opposingattorneys have not established an interest sufficiently compelling to justify withholdingthe Report.

In re Special Proceedings, 2012 U.S. Dist. LEXIS 15656, at *39.



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was said to HUD-OIG would serve only the distorted view the parties wish to present to

advance their litigation strategies in this case. FHFA Mot. at 24. A fully public proceeding,

which is all Defendants seek in opposing FHFA and HUD-OIGs motions, most certainly would

not cause any distortion. Perhaps most importantly, to a large degree, the information is already

public. The sum and substance of what the OFHEO employees testified to HUD-OIG is

contained within the publicly available HUD-OIG Report. The HUD-OIG Report even quotes

directly from the transcripts of numerous OFHEO employees interviews, including quoting

directly from the transcript of the Confidential Witnesss interview. To the extent a public

proceeding would cause any damage at all, the damage has already been done, by HUD-OIG and

OFHEO.

III. UNDER ANY STANDARD, THE FHFA/HUD-OIG MATERIALS MUST REMAIN

PUBLIC

A. The FHFA/HUD-OIG Materials Are Not Privileged

To be clear, FHFA is notinvoking any deliberative process privilege, examination

privilege, or the Privacy Act, to prevent public disclosure of the documents. FHFA Mot. at 6

(The Agency is not asserting these privileges to prevent the parties from using the documents in

this case . . . .). Instead, FHFA relies onpolicies purportedly underlying the privileges to try to

keep the documents out of public view for another few months. Id. (. . . but is invoking the

policy underlying these privileges to establish good cause for a protective order to prevent public

disclosure.) (emphasis added).

Even if a policy could prevent disclosure where the privilege does not, here such an

argument is unavailing. FHFA made no efforts to preserve the privileges at issue. FHFAs

actions regarding the HUD-OIG information make the point. As detailed above, FHFA ignores

the public dissemination of the HUD-OIG Report. FHFA ignores the public disclosure of almost



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all of the names of the OFHEO employees who cooperated with HUD-OIG. FHFA ignores the

public disclosure of the sum and substance of what those employees, including the one

remaining Confidential Witness, told HUD-OIG. OFHEO took no steps to prevent those

disclosures, nor to reverse them once made. And as noted previously, OFHEO publicized its

approval of Fannie Maes FAS 133 accounting in its own 2002 Report to Congress, and then

reversed itself in 2004 and 2006 when it deliberately put the issue of its oversight of Fannie Mae

into the public domain, again. Yet FHFA now comes into this Court and says that as a policy

matter, the Court should turn back the clock and give FHFA back privileges that OFHEO cared

so little about in the first place. Having thoroughly abandoned the privileges at issue, and having

explicitly stated in its Motion that it is not invoking those privileges, the policies underlying

those privileges are of no moment.6

FHFA also does not explain how the policies underlying the privileges should protect the

materials from disclosure at this time, yet it would be acceptable to FHFA that the materials be

used at trial (if one occurs). FHFAs concession that the materials can be used at trial is a

concession that disclosure now would not in fact be as harmful as FHFA would have the Court

believe. In any event, whatever marginal harm might be prevented by keeping the documents

under seal for an additional few months or a year is vastly outweighed by the public interest in

finally seeing the entire picture in this case of national importance and interest. There is no good

reason, let alone good cause, to kick the can down the road by keeping the informationwhich

is submitted for the Courts consideration in deciding summary judgmentunder seal until trial.

6 FHFA also ignores that the privileges are not absolute. FHFA cites the Court to a case regarding the importance ofprivileged regulatory communications. FHFA Mot. at 12-13 (quotingIn re Subpoena Served Upon Comptroller ofthe Currency, 967 F.2d 630, 633 (D.C. Cir. 1992)). Yet FHFA cuts offits extensive quote right before the courtnoted that the privileges do not cover purely factual material, and may be overridden for many reasons, including toshed light on alleged government malfeasance . . . or in other circumstances when the publics interest in effectivegovernment would be furthered by disclosure. Id. at 634 (citations and internal quotation marks omitted).



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B. There Is No Good Cause for a Protective Order

The burden is on FHFA and HUD-OIG to show good cause for why the materials, which

are presumptively public, should nonetheless be sealed. Alexander v. FBI, 186 F.R.D. 71, 75

(D.D.C. 1998). They cannot meet that burden.

As the D.C. Circuit has recognized, the good cause standard in the Rule is a flexible

one that requires an individualized balancing of the many interests that may be present in a

particular case. United States v. Microsoft Corp., 165 F.3d 952, 960 (D.C. Cir. 1999). The

standard takes into account all relevant interests, including those protected by the [F]irst

[A]mendment. Id. [T]he moving party has a heavy burden of showing extraordinary

circumstances based on specific facts that would justify a protective order. Alexander, 186

F.R.D. at 75 (internal quotation marks omitted). The Court must weigh[] the interests advanced

by the parties in light of the public interest and the duty of the courts, and give appropriate

weight and consideration to the presumption however gauged in favor of public access to judicial

records. In re Application of Natl Broad. Co., 653 F.2d 609, 613 (D.C. Cir. 1981) (internal

quotation marks and citations omitted).

The six non-exclusive factors discussed by the D.C. Circuit inHubbard, cursorily cited

by both FHFA and HUD-OIG (FHFA Mot. at 10; HUD-OIG Supp. Mem. at 2-3), lead

inexorably to the conclusion that the FHFA/HUD-OIG materials must be released. SeeUnited

States v. Hubbard, 650 F.2d 293 (D.C. Cir. 1980). However, in light of the abandonment by

FHFA of any claim of privilege, and the already public nature of most of the information

contained in the FHFA/HUD-OIG materials, theHubbardfactors require only short discussion.7

7 As restated by the D.C. Circuit inEEOC v. National Childrens Center, 98 F.3d 1406, 1409 (D.C. Cir. 1996), thesixHubbardfactors are:

(1) the need for public access to the documents at issue;(2) the extent of previous public access to the documents;(3) the fact that someone has objected to disclosure, and the identity of that person;



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First, given Fannie Maes role in the nations economy, the public has a great need for

access to these materials to fully understand what happened not only at Fannie Mae, but also

within the government agency assigned to safeguard it. See EEOC v. Natl Childrens Ctr., 98

F.3d 1406, 1410 (D.C. Cir. 1996) ([T]he nature of the services provided by the Center as well as

the Centers receipt of public funding cuts against rather than in favor of sealing the record. The

public should be able to learn how the money it has contributed to a charitable organization is

being spent.). Without the materials, the public is left with the partial, distorted story of the

type that Judge Sullivan warned so strongly against. In re Special Proceedings, 2012 U.S. Dist.

LEXIS 15656, at *6-7.

Second, much of the subject matter of the information in the materials is already public,

including the identity of all but one of the OFHEO witnesses in the HUD-OIG investigation, the

sum and substance of what all witnesses told HUD-OIG (including the Confidential Witness),

details of OFHEOs improper actions toward Fannie Mae, and details of OFHEOs approval of

Fannie Maes FAS 133 accounting.8

Third, while there are objections to the disclosure, those objections have been interposed

on behalf of individuals whose identities and actions have already been publicly disclosed, or by

the entities that made those disclosures. Their objections are too latethe disclosures they

worry about occurred years ago.

Fourth, due to the public nature of the information, its pertinence to matters of public

(4) the strength of any property and privacy interests asserted;(5) the possibility of prejudice to those opposing disclosure; and(6) the purposes for which the documents were introduced during the judicial proceedings.

8 FHFA makes repeated reference to having produced the documents at issue under certain assurances of continuedprotection and privilege, and for that proposition, heavily cites a hearing that occurred on February 27, 2009. FHFAMot. at 8. That hearing, however, was about the sneak-a-peak process. FHFA appears to suggest that all of thedocuments at issue here were produced pursuant to and were accorded the protection afforded by that process.FHFA fails to inform the Court that many of the documents at issue were either (a) produced by the agencypriortothe sneak-a-peak process, during the normal course of discovery; or (b) were produced by entities other than FHFA.



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importance, and the waivers discussed above, any personal privacy interests are minimal at best.

Only one participant in the HUD-OIG investigation remains unnamed publicly. That

individuals extensive participation in the examinations of Fannie Mae is, however, publicly

known. The individuals identity, readily discernable to anyone knowledgeable about the facts

of this matter, will in any event be revealed at trial, should trial occur.

Fifth, any prejudice to the individuals from release of their identity and information

about their actions has already occurred and would not be measurably worsened by disclosure

here. Their cooperation with the HUD-OIG investigation, for example, is known to the public

and to the individuals employers, and any risk of retaliation, however small, has passed.

Sixth, the materials have been cited and relied on by the parties in their pleadings for

Summary Judgment. They were used in depositions of fact and expert witnesses; are themselves

transcripts of the depositions of those witnesses; or are expert reports submitted in this litigation.

FHFA complains that the materials are not relevant, but FHFAs view of the relevance of these

materials was long ago rejected. And it is unclear how FHFA can suggest that material

concerning the key accounting rule at issue in this case is not relevant, or that material about the

conduct of OFHEOs Special Examination is not relevant when plaintiffs Complaint (as well as

their summary judgment papers) rely almost exclusively on the reports that resulted from that

investigation.

C. Even in the Face of Much Weightier Privacy Interests, the Stevens Report

Required Disclosure

Judge Sullivans analysis is again helpful on the factors for the Court to consider

regarding releasing materials alleging and detailing government wrongdoing. Certainly the

information Judge Sullivan ended up releasinga report describing serious prosecutorial

misconduct by Department of Justice attorneys that led to the conviction of a United States



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15

Senatorhad the potential to be much more damaging to the targets described therein than

would the FHFA/HUD-OIG materials. Yet even in the face of those weighty privacy interests,

disclosure was nonetheless required in light of the public interest in knowing the full story of

what occurred in a very public, costly proceeding.

After considering the First Amendment right of access to criminal proceedings, Judge

Sullivan looked at the D.C. Circuits precedents regarding the release of Independent Counsel

Reports, includingIn re North, 16 F.3d 1234 (D.C. Cir., Spec. Div., 1994). TheNorth court set

out four non-exclusive factors, beyond the public interest, for courts to consider regarding

disclosure of materials:

[1] whether the subjects of the investigations have already been disclosed tothe public;

[2] whether the subjects do not object to the filings being released to thepublic;

[3] whether the filings contain information which is already publiclyknown; and

[4] whether the court filings consist of legal or factual rulings in a case

which should be publicly available to understand the courts rules andprecedents or to follow the developments in a particular manner.

Id. at 1237. Applying these four factors to the FHFA/HUD-OIG materials would result in their

release to the public, as they did for the Stevens Report.

On the issue of prior public disclosure of subjects identities, Judge Sullivan found that

the subject attorneys were named in the Courts public order appointing Mr. Schuelke, have

been identified in any number of articles regarding the investigation, and several have made

statements to the media themselves about Mr. Schuelkes investigation. In re Special

Proceedings, 2012 U.S. Dist. LEXIS 15656, at *64. The same, of course, is true with respect to

the identity of the subjects of the HUD-OIG investigation, and their own public statements.



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Regarding objections, as here, Judge Sullivan found that certain of the subjects of the

Report had objected to disclosure. However, that factor weighed only slightly against disclosure

and is heavily outweighed by the other factors underNorth. In re Special Proceedings, 2012

U.S. Dist. LEXIS 15656, at *65.

Judge Sullivan relied heavily on the thirdNorth factor, and whether the information in

the materials was already publicly known. Of primary concern was the fact that withholding

the Report leaves the public in some cases with only the wrong or misleading information. In

re Special Proceedings, 2012 U.S. Dist. LEXIS 15656, at *66. Not only is the information [in

the materials] widely known, it is widely known incorrectly. North, 16 F.3d at 1240. The

North court was concerned that statements and media accounts of subjects addressed in the

Report were made without the right of reply by the subjects, were partial and were in the

judgment of this Court more unfair to the persons named than will be the present release of the

completed Report. Id. at 1241. The same is true here. The full picture of what happened

during the Special Examination of Fannie Mae can only be known by release of the materials to

flesh out, and rebut, the wildly inaccurate picture painted by FHFAs predecessor and others in

the past.

Finally, Judge Sullivan held that public disclosure would facilitate the publics

understanding of the Courts rulings . . . [and] better enable the public to follow and place in

context the developments in the Stevens case, all of which, again, were widely publicized at the

time. In re Special Proceedings, 2012 U.S. Dist. LEXIS 15656, at *66-67. The public

disclosure of the FHFA/HUD-OIG materials is necessary for the public to understand the public

interactions between Fannie Mae and OFHEO, as well as this Courts consideration of the

pending summary judgment motions.



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The FHFA-HUD-OIG materials do not come anywhere close to implicating the same

privacy interests at issue in Stevens. Thus, if the Stevens Report does not merit confidential

treatment, there is no basis to afford the documents at issue here such treatment.

IV. THE PRIVACY ACT AND INSPECTOR GENERAL ACT DO NOT BAR THE

COURT FROM PERMITTING PUBLIC DISCLOSURE OF ANY OF THE

FHFA/HUD-OIG MATERIALS

While the HUD-OIG has filed a separate motion for a protective order, its position is

wholly derivative of the objections interposed by FHFA and the former OFHEO officials. HUD-

OIG takes the position that it is required by the Privacy Act and the Inspector General Act to

seek a protective order in the absence of consent from the former OFHEO officials or an earlier

court order. HUD-OIG is incorrect.

HUD-OIG ignores that both Acts impose requirements onHUD-OIG to keep certain

information confidential; the Acts do not impose requirements or restrictions on the Court.

Neither Act even addresses court proceedings, and nothing in them can be read to displace the

normal rules of procedure or rules of decision followed by the Court. Indeed, one of the

contemplated methods of disclosure under the Privacy Act is by court order, as HUD-OIG itself

admits. HUD-OIG Not. at 4 (citing 5 U.S.C. 552a(b)(11)).

HUD-OIG also ignores that it, too, waived its arguments under the Acts by failing to take

any steps to protect the information at issueeither to prevent the initial public disclosure of the

information, or to correct any disclosure that occurred. HUD-OIG issued its investigation Report

and allowed a third party to post it publicly. That Report contained the identities of OFHEO

employees who spoke with HUD-OIG as well as the contents of their testimony. In so doing,

HUD-OIG disclosed or allowed the disclosure of the very information it now claims that the

Privacy Act and Inspector General Act forbid disclosing. If any damage could be done, it

already has been done. And even if HUD-OIG had not waived its ability to invoke either Act



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here, the Acts would merely serve as one of many factors for the Court to consider when

weighing whether HUD-OIG met its heavy burden to seal this information.

CONCLUSION

For the foregoing reasons, Defendants respectfully request that the Court deny FHFA and

HUD-OIGs motions for a protective order.

Dated: February 27, 2012 Respectfully submitted by,

/s/ David S. Krakoff_______________David S. Krakoff (D.C. Bar No. 229641)Christopher F. Regan (D.C. Bar No. 433972)Adam B. Miller (D.C. Bar No. 496339)BUCKLEYSANDLER LLP1250 24th Street, N.W.Washington, D.C. 20037Telephone: (202) 349-8000Facsimile: (202) 349-8080Counsel for Defendant Leanne G. Spencer

/s/ Kevin M. Downey______________Kevin M. Downey (D.C. Bar No. 438547)Alex G. Romain (D.C. Bar No. 468508)Joseph M. Terry (D.C. Bar No. 473095)Matthew L. Fore (D.C. Bar No. 491184)WILLIAMS & CONNOLLY LLP725 Twelfth Street, N.W.Washington, D.C. 20005Tel: (202) 434-5000Fax: (202) 434-5029Counsel for Defendant Franklin D. Raines

/s/ Eric R. Delinsky_______________Steven M. Salky (D.C. Bar No. 360175)Eric R. Delinsky (D.C. Bar No. 460958)ZUCKERMAN SPAEDER LLP1800 M Street, N.W.Washington, D.C. 20036Telephone: (202) 778-1800Facsimile: (202) 822-8106Counsel for Defendant J. Timothy Howard
