NEW YORK, Aug. 2, 2013 (GLOBE NEWSWIRE) -- Pomerantz Grossman Hufford Dahlstrom & Gross LLP has filed a class action in United States Court of Federal Claims, docketed under 13-cv-00496-MMS, on behalf of a class consisting of all persons or entities who purchased or otherwise held shares of Federal National Mortgage Association ("Fannie Mae") and/or Federal Home Loan Mortgage Corporation ("Freddie Mac") Junior Preferred Stock prior to, and as of August 17, 2012 all dates inclusive (the "Class Period"). This class action seeks to recover damages against the Government of The United States of America for just compensation for violation of the Fifth Amendment of the U.S. constitution. The Complaint alleges that the Government, by imposing the Net Worth Sweep, took Plaintiff's and Class' vested property rights without just compensation.
If you are a shareholder who purchased shares of Fannie Mae or Freddie Mac Junior Preferred securities during the Class Period, please contact Robert S. Willoughby at rswilloughby@pomlaw.com or 888.476.6529 (or 888.4-POMLAW), toll free, x237. Those who inquire by e-mail are encouraged to include their mailing address, telephone number, and number of shares purchased.
The Complaint alleges that in September of 2008, the Government (acting through the FHFA) placed Fannie Mae and Freddie Mac into conservatorship, putting it under the control of the FHFA, which is an agency of the Government.
In connection with the conservatorships, the Government (specifically, the U.S. Treasury) entered into substantially identical Preferred Stock Purchase Agreements (the "Agreements") with both Fannie Mae and Freddie Mac. Under these Agreements, the Treasury acquired from each company preferred stock (the "Senior Preferred Stock") that (i) is senior in priority to all other series of Fannie Mae and Freddie Mac preferred stock (all such other series of Fannie and Freddie preferred stock shall be referred to as the "Junior Preferred Stock"), (ii) was given an initial face value of $1 billion, but also provided that this face value would be increased by any amount the Treasury invested in or advanced to Fannie Mae or Freddie Mac, (iii) would receive preferential liquidation rights (i.e., would receive face value, as increased by any Treasury investments or advances, as a liquidation preference prior to any monies going to the holders of Junior Preferred Stock or Common Stock), and (iv) would earn an annual dividend of 10% of the face value (as increased by any Treasury investments or advances). In addition, each of the Agreements provided the Treasury with warrants that could be exercised at any time to allow the Treasury to acquire 79.9% of the Common Stock of Fannie and Freddie, respectively, for a nominal price.
Between the start of the conservatorship in September 2008 through the beginning of 2012, the Government advanced Fannie Mae and Freddie Mac more than $188 billion-most of which was advanced to cover accounting losses reflecting excessive write-downs of assets that have turned out to be worth far more than their written down amounts. These advances increased the face value of the Senior Preferred Stock held by the Government to approximately $189 billion, entitling the Government to an annual dividend of approximately $19 billion, which translates to a quarterly dividend of just under $5 billion.
By 2012, the housing market was well on its way to recovery and Fannie Mae and Freddie Mac had become profitable again, reporting increasing profits through 2011 and 2012. Indeed, by the second quarter of 2012, Fannie and Freddie made a combined quarterly profit of approximately $8.3 billion. This was the first quarter for which Fannie and Freddie reported a combined quarterly profit that exceeded the just under $5 billion quarterly dividend payable to the Treasury on its Senior Preferred Stock. Thus, by no later than the end of the second quarter of 2012, Fannie and Freddie were generating sufficient profits to pay a dividend to the holders of their Junior Preferred Stock (or to payout in a liquidation distribution, in the event of any liquidation, dissolution, or winding up of Fannie or Freddie). However, on August 17, 2012, the Government unilaterally amended the terms of its Agreements with Fannie Mae and Freddie Mac, and mandated that, beginning on January 1, 2013, Fannie Mae and Freddie Mac would have to pay the Government dividends equal to their entire net worth (the "Net Worth Sweep"), leaving Fannie Mae and Freddie Mac with no funds to redeem the Government's Senior Preferred Stock or to distribute to the holders of Junior Preferred Stock, whether by dividend, redemption, or in a liquidation. The Government's August 2012 action appropriated the valuable contractual and property rights owned by the holders of Junior Preferred Stock for no consideration.
The Pomerantz Firm, with offices in New York, Chicago, Florida, and San Diego, is acknowledged as one of the premier firms in the areas of corporate, securities, and antitrust class litigation. Founded by the late Abraham L. Pomerantz, known as the dean of the class action bar, the Pomerantz Firm pioneered the field of securities class actions. Today, more than 70 years later, the Pomerantz Firm continues in the tradition he established, fighting for the rights of the victims of securities fraud, breaches of fiduciary duty, and corporate misconduct. The Firm has recovered numerous multimillion-dollar damages awards on behalf of class members. See www.pomerantzlaw.com .
Robert S. Willoughby Pomerantz Grossman Hufford Dahlstrom & Gross LLP
