Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 1 of 46 Redacted Version IN THE UNITED STATES COURT OF FEDERAL CLAIMS

Transcription

1 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 1 of 46 Redacted Version IN THE UNITED STATES COURT OF FEDERAL CLAIMS ) FAIRHOLME FUNDS, INC., et al., ) ) Plaintiffs, ) ) v. ) ) THE UNITED STATES, ) ) Defendant. ) ) No C (Judge Sweeney) PLAINTIFFS PUBLIC REDACTED MOTION TO COMPEL PRODUCTION OF CERTAIN DOCUMENTS WITHHELD FOR PRIVILEGE Of counsel: David H. Thompson Vincent J. Colatriano Howard C. Nielson, Jr. Peter A. Patterson Brian W. Barnes COOPER & KIRK, PLLC 1523 New Hampshire Avenue, N.W. Washington, D.C (202) (202) (fax) Charles J. Cooper Counsel of Record COOPER & KIRK, PLLC 1523 New Hampshire Avenue, N.W. Washington, D.C (202) (202) (fax) ccooper@cooperkirk.com November 23, 2015

2 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 2 of 46 TABLE OF CONTENTS Page TABLE OF AUTHORITIES... iv INTRODUCTION...1 ARGUMENT...4 I. Defendant s Privilege Assertions in This Litigation Have Been Haphazard, Inconsistent, and Overbroad....4 II. Defendant Has Not Properly Asserted the Deliberative Process Privilege, and Many of Its Deliberative Process Privilege Claims Are Overbroad or Without Legal Basis A. Defendant Has Not Properly Asserted the Deliberative Process Privilege B. The Deliberative Process Privilege Does Not Protect Evidence of Defendant s Purposes, Intentions, and Motivations C. Defendant s Litigating Position that FHFA Is Not the United States Precludes It from Withholding FHFA Documents Under the Deliberative Process Privilege D. The Deliberative Process Privilege Does Not Protect Documents That Discuss the Net Worth Sweep After It Was Imposed E. The Deliberative Process Privilege Does Not Protect Financial Projections, Models, or Other Materials that Contain Only Non- Deliberative Factual Information F. Plaintiffs Need and the Public Interest Outweigh Any Legitimate Interest Defendant May Have in Nondisclosure...22 III. The Bank Examination Privilege Is Not Available in This Case, and in Any Event Defendant s Assertions of the Privilege Are Overbroad and Improper A. FHFA s Communications with the Companies Are Ineligible for the Bank Examination Privilege Because the Companies Are Not Banks B. FHFA s Communications with the Companies During Conservatorship Are Not Protected by the Bank Examination Privilege i

3 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 3 of 46 C. Even If the Bank Examination Privilege Applies, the Court Should Review a Subset of Bank Examination Materials to Determine Whether Defendant Properly Withheld Them IV. Defendant Should Be Ordered To Produce Materials Withheld Under the Presidential Communications Privilege CONCLUSION...36 APPENDIX Exhibit 1: Exhibit 2: Exhibit 3: Exhibit 4: Exhibit 5: Exhibit 6: Excerpts from Nov. 19, 2015 Treasury and FHFA Privilege Logs... A001 Letter from Elizabeth Hosford to Brian Barnes (Nov. 13, 2015)... A012 Letter from Vincent Colatriano to Gregg Schwind (Feb. 5, 2015)... A027 Letter from Gregg Schwind to Vincent Colatriano (July 10, 2015)... A033 from Brian Barnes to Elizabeth Hosford and Gregg Schwind (July 17, :59 PM EST)... A035 Letter from Elizabeth Hosford to Vincent Colatriano (July 28, 2015)... A037 Exhibit 7: from Vincent Colatriano to Elizabeth Hosford (Aug. 12, :53 PM EST)... A040 Exhibit 8: from Elizabeth Hosford to Vincent Colatriano (Aug. 17, :29 PM EST)... A048 Exhibit 9: Exhibit 10: Exhibit 11: Exhibit 12: Exhibit 13: Exhibit 14: Exhibit 15: Exhibit 16: Exhibit 17: Exhibit 18: Exhibit 19: Exhibit 20: Transcript of Deposition of Susan McFarland (July 15, 2015)... A055 Letter from Elizabeth Hosford to Vincent Colatriano (Sept. 1, 2015)... A68 UST A75 UST A79 UST A89 UST A93 UST A102 UST A139 UST A143 UST A145 UST A147 Transcript of Deposition of Edward DeMarco (May 7, 2015)... A149 Exhibit 21: Discovery Order No. 6, Starr Int l Co. v. United States, No C (Fed. Cl. Nov. 6, 2013), ECF No A157 Exhibit 22: Transcript of June 19, 2014 Status Conference... A171 ii

4 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 4 of 46 Exhibit 23: Exhibit 24: Exhibit 25: Exhibit 26: Exhibit 27: Exhibit 28: Exhibit 29: Exhibit 30: Exhibit 31: Exhibit 32: Exhibit 33: Exhibit 34: Exhibit 35: Exhibit 36: UST A177 UST A179 UST A181 Excerpts from D.D.C. Action Administrative Record, T-3833 through T A183 Excerpts from D.D.C. Action Administrative Record, T-3883 through T A214 FHFA, FHFA Answers to the PWG Working Group on Supervision Questionnaire (Apr. 29, 2010)... A227 FHFA A233 FHFA A236 FHFA to FHFA _ A238 UST A256 UST A260 UST A263 Transcript of Deposition of Jeff Foster (July 14, 2015)... A266 Transcript of Deposition of Timothy Bowler (July 1, 2015)... A269 iii

5 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 5 of 46 Cases TABLE OF AUTHORITIES Page Abramson v. United States, 39 Fed. Cl. 290 (1997)...18, 19 Alpha I, LP ex rel. Sands v. United States, 83 Fed. Cl. 279 (2008)...11, 13 Carter v. Department of Commerce, 186 F. Supp. 2d 1147 (D. Or. 2001)...21 Chamber of Commerce of United States v. Legal Aid Soc y of Alameda Cnty., 423 U.S (1975)...30 Chao v. Westside Drywall, Inc., 254 F.R.D. 651 (D. Or. 2009)...13 Confidential Informant v. United States, 108 Fed. Cl. 121 (2012)...12, 18, 20 Cornejo v. Mercy Hosp. and Med. Ctr., 2014 WL (N.D. Ill. Sept. 15, 2014)...10 Dairyland Power Coop. v. United States, 79 Fed. Cl. 709 (2007)... passim Dairyland Power Coop. v. United States, 77 Fed. Cl. 330 (2007)...23, 24, 26 Dobyns v. United States, -- Fed. Cl. --, 2015 WL (June 19, 2015)...18, 19 Dunnet Bay Constr. Co. v. Hannig, 2012 WL (C.D. Ill. May 7, 2012)...15 Evergreen Trading, LLC ex rel. Nussdorf v. United States, 80 Fed. Cl. 122 (2007)...31 FHFA v. JPMorgan Chase & Co., 978 F. Supp. 2d 267 (S.D.N.Y. 2013)...29, 30 First Heights Bank, FSB v. United States, 46 Fed. Cl. 312 (2000)...10, 15, 23, 26 Ford Motor Co. v. United States, 94 Fed. Cl. 211 (2010)...19 In re Bank One Sec. Litig., 209 F.R.D. 418 (N.D. Ill. 2002)...27 In re Putnam Inv. Mgmt., LLC, 2004 WL , SEC Release No. 614 (SEC Apr. 7, 2004)...29 In re Sealed Case, 121 F.3d 729 (D.C. Cir. 1997)...35, 36 In re Subpoena Duces Tecum Served on Office of Comptroller of Currency, 156 F.3d 1279 (D.C. Cir. 1998)...15, 16 In re Subpoena Duces Tecum Served Upon Office of Comptroller of Currency, 151 F.R.D. 1 (D.D.C. 1992)...34 In re Subpoena Served Upon Comptroller of the Currency, 967 F.2d 630 (D.C. Cir. 1992)...27, 30, 32, 33 In re United States, 321 F. App x 953 (Fed. Cir. 2009)...19 Judicial Watch, Inc. v. Department of Justice, 365 F.3d 1108 (D.C. Cir. 2004)...35 Khoshmukhamedov v. Potomac Elec. Power Co., 2012 WL (D. Md. Apr. 17, 2012)...10 Lahr v. National Transp. Safety Bd., 453 F. Supp. 2d 1153 (C.D. Cal. 2006)...21 iv

6 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 6 of 46 Lawrence E. Jaffe Pension Plan v. Household Int l, Inc., 239 F.R.D. 508 (N.D. Ill. 2006)...29 Lundy v. Interfirst Corp., 105 F.R.D. 499 (D.D.C. 1985)...34, 35 Marriott Int l Resorts, LP v. United States, 437 F.3d 1302 (Fed. Cir. 2006)...12 Martin v. Albany Bus. Journal, Inc., 780 F. Supp. 927 (N.D.N.Y. 1992)...12 Merchants Bank v. Vescio, 205 B.R. 37 (D. Vt. 1997)...29 NLRB v. Sears, Roebuck & Co., 421 U.S. 132 (1975)...19 Pacific Gas & Elec. Co. v. United States, 70 Fed. Cl. 128 (2006)...10, 12, 25 Pacific Gas & Elec. Co. v. United States, 71 Fed. Cl. 205 (2006)...12, 23, 26 Pearson v. Miller, 211 F.3d 57 (3d Cir. 2000)...28 Reilly v. EPA, 429 F. Supp. 2d 335 (D. Mass. 2006)...21 Schreiber v. Society for Sav. Bancorp, Inc., 11 F.3d 217 (D.C. Cir. 1993)...32, 35 Scott Paper Co. v. United States, 943 F. Supp. 489 (E.D. Pa. 1996)...23 Scott v. Board of Educ. of the City of East Orange, 219 F.R.D. 333 (D.N.J. 2004)...15 Testwuide v. United States, 2006 WL (Fed. Cl. Aug. 7, 2006)...9 Texaco P.R., Inc. v. Department of Consumer Affairs, 60 F.3d 867 (1st Cir. 1995)...19, 24, 25, 27 Ullmann v. United States, 350 U.S. 422 (1956)...31 United States v. Hooker Chems. & Plastics Co., 123 F.R.D. 3 (W.D.N.Y. 1988)...18, 19 University of Pa. v. EEOC, 493 U.S. 182 (1990)...28 Walsky Constr. Co. v. United States, 20 Cl. Ct. 317 (1990)...11 Wultz v. Bank of China, Ltd., 61 F. Supp. 3d 272 (S.D.N.Y. 2013)...28, 34 Statutory Provisions, Legislative Material, and Rules 12 U.S.C. 4521(a) (b)(2)(A) (D) U.S.C Financial Services Antifraud Network Act of 2001, H.R. 1408, 107th Cong. (2001)...30 v

7 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 7 of 46 Other FHFA, Reports and Plans, Freddie Mac 2014 Annual Report (Form 10-K) (Feb. 19, 2015), Fannie Mae 2014 Annual Report (Form 10-K) (Feb. 20, 2015), vi

8 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 8 of 46 Redacted Version INTRODUCTION After months of discussions regarding Defendant s privilege claims, it has become clear, regrettably, that the parties cannot agree about a variety of significant issues and that guidance from the Court is needed. Presenting those issues to the Court in a manageable form is complicated by the sheer scope and magnitude of Defendant s privilege assertions and withholding of responsive documents; Defendant s current privilege logs, which taken together exceed 1,200 pages, cover more than eleven thousand documents withheld in whole or in part. Complicating matters further, Defendant has revised and supplemented its purportedly final privilege logs on numerous occasions, including as recently as November 19. Given the enormous number of withheld documents and the very general and in many instances clearly inadequate document descriptions in Defendant s privilege logs, it is virtually impossible for Plaintiffs to identify all documents that may have been improperly withheld. Plaintiffs have worked with Defendant over the last several months in an effort to develop a mechanism for presenting the parties privilege disputes to the Court. This motion reflects the approach that Plaintiffs ultimately concluded would be most efficient, which is to: (1) identify a number of overarching legal questions relating to Defendant s privilege assertions that the Court can likely address without reference to particular documents; and (2) identify a relatively small number of documents listed in Exhibit 1 that illustrate both those overarching legal questions and other privilege issues that can be most efficiently presented in the context of specific documents. It is Plaintiffs hope that the Court s resolution of this motion will provide meaningful guidance that can be applied to many of Defendant s thousands of other privilege assertions, which 1

9 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 9 of 46 include assertions of the deliberative process, bank examination, and presidential communications privileges. 1 While it is not feasible, given the above facts, for Plaintiffs to assess all of Defendant s privilege assertions, what is apparent is that many of those assertions suffer from serious deficiencies. Thus, with respect to the deliberative process privilege, Defendant has failed to submit a declaration from an agency head or authorized delegate establishing that someone other than Defendant s litigation counsel has even reviewed the documents at issue, let alone performed the critical analyses that are necessary for the proper assertion of this qualified privilege. Defendant has therefore failed to satisfy its burden to establish its claims of privilege. Defendant has also improperly asserted the deliberative process privilege a privilege that belongs exclusively to the Executive Branch over documents produced by or shared with FHFA, despite Defendant s litigating position that FHFA is not the United States. There is also serious reason to doubt that all of the documents Defendant has withheld are deliberative and predecisional, for some of the documents listed in Exhibit 1 appear to discuss the Net Worth Sweep and were created after the Third Amendment to the Preferred Stock Purchase Agreements was implemented. Furthermore, even where the documents withheld by Defendant are genuinely deliberative and predecisional in nature, they are not privileged to the extent that they are directly probative of Defendant s motives for adopting the Net Worth Sweep. Finally, even assuming, solely for purposes of argument, that 1 At least with respect to some of the documents listed in Exhibit 1, Defendant has said that it is withholding variations of similar documents with the same general substance and suggested that the Court should simultaneously rule on all similar documents or none at all. Letter from Elizabeth Hosford to Brian Barnes at 9 (Nov. 13, 2015) (attached as Ex. 2). While Plaintiffs do not object in principle to the Court reviewing additional materials where doing so is necessary to give the Court a complete understanding of Defendant s privilege assertions, we do not believe that it is necessary for the Court to review numerous nearly identical drafts of the same document or that doing so would provide the parties meaningful additional guidance on the disputed privilege issues presented in this motion. 2

10 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 10 of 46 Defendant may have grounds to claim the deliberative process privilege over these documents in the first instance, that privilege is not absolute, and in the circumstances of this case, the Court should conclude that Plaintiffs have easily overcome any invocation of this qualified privilege. Plaintiffs urgent need for these documents and the public s critical interest in fair and accurate factfinding in this important case outweighs any legitimate interest Defendant may have in shielding its deliberations from scrutiny. And any disclosure of the documents at issue will be subject to the Court s protective order, which narrowly restricts access to any confidential information to a small group of specifically identified, judicially admitted individuals. Defendant s other privilege assertions are similarly flawed. Defendant has improperly asserted the bank examination privilege over a number of FHFA documents even though the Companies are not banks and even though recognizing the privilege, which is intended to promote frank communications between banks and their regulators, would serve no purpose while the Companies are subject to FHFA s complete control during conservatorship. And Plaintiffs have a substantial need for documents Defendant has withheld under the presidential communications privilege that justifies requiring disclosure of those documents. For these and other reasons explained in this motion, this Court should issue an order making clear that an array of Defendant s privilege assertions are overbroad and improper. Moreover, to the extent that the Court does not order Defendant to produce the documents listed in Exhibit 1 outright, it should review those documents in camera to determine whether Defendant s privilege assertions are merited and, even if they are, whether documents withheld 3

11 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 11 of 46 under the qualified deliberative process, bank examination, and presidential communications privileges should nevertheless be released to Plaintiffs. 2 ARGUMENT I. Defendant s Privilege Assertions in This Litigation Have Been Haphazard, Inconsistent, and Overbroad. Plaintiffs have long been concerned about Defendant s sweeping assertions of the deliberative process privilege and other privileges to shield over eleven thousand responsive documents from discovery. See, e.g., Letter from Vincent Colatriano to Gregg Schwind (Feb. 5, 2015) (attached as Ex. 3). And a number of events and discoveries in recent months confirm that Defendant s assertions of privilege have been haphazard, inconsistent, and in at least some cases plainly unwarranted. Under the circumstances, Defendant should be required to re-review the documents it has withheld for privilege to ensure that it has consistently and correctly applied governing legal standards when withholding materials for privilege. First, on July 10, 2015, Defendant informed Plaintiffs that it had inadvertently provided plaintiffs several documents it considers privileged and clawed back eight such documents pursuant to paragraph 13 of the Protective Order. Letter from Gregg Schwind to Vincent Colatriano at A034 (July 10, 2015) (attached as Ex. 4). Plaintiffs promptly destroyed all copies of these documents as required by the Protective Order, but informed Defendant that a number of these documents were not included in Defendant s purportedly final privilege logs. See from Brian Barnes to Elizabeth Hosford and Gregg Schwind at A036 (July 17, :59 PM EST) (attached as Ex. 5). DOJ responded by withdrawing entirely any claim of privilege over four of 2 This motion covers only a small subset of the documents that Plaintiffs believe that Defendant may have improperly withheld for privilege. Plaintiffs nevertheless believe that guidance that may be provided by the Court s ruling on this motion will assist the parties in resolving other privilege disputes. Plaintiffs reserve, however, the right to seek to compel the disclosure of additional documents if the parties are unable to resolve other such disputes. 4

12 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 12 of 46 the eight documents, producing three of the documents subject to very minor redactions, and standing by its assertion of privilege over only one of the documents in its entirety. See Letter from Elizabeth Hosford to Vincent Colatriano at A (July 28, 2015) (attached as Ex. 6). Based on Plaintiffs review of the four documents Defendant once again produced without redaction, Plaintiffs believe that Defendant s initial claim of privilege over these documents was wholly untenable. And the fact that Defendant s counsel withdrew any such claim once challenged suggests that they reached that conclusion as well. Given the baseless nature of Defendant s claims of privilege over at least half of the clawed back documents documents that were presumably selected with care, since they were among a very small group of documents that Defendant identified for clawback Plaintiffs are concerned that many of Defendant s other claims of privilege may be unwarranted as well. Second, in August of this year, Plaintiffs identified more than 2,700 documents that Defendant had withheld as privileged without any mention in its purportedly final privilege logs. See from Vincent Colatriano to Elizabeth Hosford at A043 (Aug. 12, :53 PM EST) (attached as Ex. 7). 3 After Plaintiffs counsel raised this issue, Defendant indicated that approximately 1,800 of these documents were exact duplicates of other documents that either appeared on its privilege logs or had been produced, and that it had subsequently determined that 250 of these documents were not responsive to this Court s discovery order. See from Elizabeth Hosford to Vincent Colatriano at A049 (Aug. 17, :29 PM EST) (attached as Ex. 8). Defendant also indicated that approximately 600 of these documents were inadvertently 3 During discovery in this case, Defendant s practice when withholding a document for privilege has been to assign a Bates number to the document and to include a placeholder sheet in its production identifying the privileged document s Bates number and stating that the document was withheld for privilege. There were more than 2,700 such placeholder sheets included in Defendant s productions that did not correspond to any entries on its privilege logs. 5

13 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 13 of 46 omitted from its privilege logs and would be included on future logs and that it had withdrawn any claim over approximately forty-five of the documents, which it promised to produce. See id. Plaintiffs are concerned that Defendant s failure even to notice that more than 2,700 documents that it had flagged as withheld for privilege were missing from its privilege logs despite the ample time it has had to prepare those logs 4 indicates a general lack of care in determining which documents to withhold for privilege. Third, also in August, Plaintiffs sent Defendant a list of 170 documents on its privilege logs that Plaintiffs were considering using as a representative sample in a motion to compel that would present to the Court a number of the parties broader privilege disputes. In preparing that list, Plaintiffs focused on Treasury documents created between August 7 and August 13, 2012, a date range that corresponds to two August 9, 2012 meetings. 5 Defendant imposed the Net Worth Sweep eight days later. 4 Defendant had more than a year to prepare its privilege logs given the multiple extensions this Court granted. See Order (Apr. 4, 2014), Doc. 40 (discovery to be completed by July 31, 2014); Order (Sept. 8, 2014), Doc. 92 (extending discovery cutoff deadline to Mar. 27, 2015); Order (Mar. 16, 2015), Doc. 138 (extending discovery cutoff deadline to June 29, 2015); Order (July 9, 2015), Doc. 193 (extending discovery cutoff deadline to Sept. 4, 2015). 5 Starting in late 2008, FHFA required Fannie and Freddie to write down approximately $100 billion of their deferred tax assets, causing corresponding declines in the Companies net worth that required infusions of cash from Treasury under the terms of the PSPAs. 6

14 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 14 of 46 Defendant eventually responded to Plaintiffs list with a letter indicating that its review of the 170 documents Plaintiffs had identified prompted it to reconsider its privilege claims over 41 documents. Letter from Elizabeth Hosford to Vincent Colatriano at A (Sept. 1, 2015) (attached as Ex. 10). Among the materials that Defendant subsequently produced was a Q&A document that Defendant had previously withheld under the deliberative process privilege. Ex. 11 at A076, UST That document, id. at A078, UST , i.e., windfall profits for the Government. It is deeply troubling that Defendant originally asserted the deliberative process privilege over a document that is plainly not privileged and contains a critical admission that contradicts Defendant s basic explanation that the Net Worth Sweep was necessary to save the Companies from exhausting Treasury s funding commitment by paying 10% cash dividends under the original terms of Treasury s investment. More generally, the fact that Defendant was unable to maintain its privilege assertions with respect to more than twenty percent of a sample of entries taken from its privilege logs strongly suggests that Defendant took an overbroad approach when determining which documents it would withhold for privilege. Fourth, in October, Plaintiffs identified a list of 88 additional documents that they proposed to use as a sample to present to the Court for resolution of many of the parties privilege disputes. Defendant responded by saying that its review of the 88 documents had prompted it to withdraw its privilege claims over 17 documents. Ex. 2 at A As with Plaintiffs list of 170 documents from August, re-review of a sample of documents withheld for privilege prompted Defendant to produce either the document in question or a related document in about one out of 7

15 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 15 of 46 every five instances. Exhibit 1, which this motion uses as a sample to frame many of the parties broader disagreements over privilege issues, identifies a subset of the documents from Plaintiffs October list that Defendant did not ultimately produce. Two of the documents Defendant produced only after it became apparent that Plaintiffs were about to file this motion to compel are particularly noteworthy. First, Defendant produced a memo Ex. 12 at A081, UST That fact utterly discredits Defendant s death spiral explanation for why it imposed the Net Worth Sweep, and it is revealed in a memo that is clearly responsive to document requests that Plaintiffs propounded in April Even though it is clearly not privileged, Defendant did not produce this highly damaging document until last week. Also in anticipation of this motion to compel, Defendant belatedly produced Here again, it was only when threatened with a motion to compel 19 months after first receiving Plaintiffs document 8

16 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 16 of 46 requests that Defendant produced a clearly responsive document that it now concedes is not privileged and that directly undermines the basic narrative it has used to defend the Net Worth Sweep. Fifth, Plaintiffs have long been concerned that the vague and highly generic document descriptions appearing on Defendant s privilege logs would make it impossible to meaningfully assess Defendant s privilege claims. Ex. 3 at A (identifying this concern in February 2015); see Testwuide v. United States, 2006 WL , at *4 (Fed. Cl. Aug. 7, 2006) (explaining that boilerplate assertions on privilege logs are insufficient). Plaintiffs raised this issue with Defendant with respect to specific documents identified on their August and October document lists, and in both instances Defendant responded by providing much more extensive descriptions of the specific documents in question. See Ex. 2 at A ; Ex. 10. Defendant has refused, however, to provide similarly complete descriptions for all of the documents it is withholding as privileged, and a large number of the documents on Defendant s privilege logs do not come close to providing sufficient information to establish a claim of privilege. It is of course only natural to expect that, on occasion, the parties give and take during the course of discovery will prompt Defendant to change its position as to whether particular documents are privileged. The problem here, however, is that the large number of times Defendant has shifted its position in response to challenges by Plaintiffs rises above such normal give and take and instead calls into question Defendant s entire approach to asserting privilege. Many of the documents that have been produced as part of these negotiations are not even arguably privileged there was never any legitimate basis for withholding these documents as privileged; and they were produced only when we indicated an intent to bring these documents to the Court s attention. E.g., Ex. 14 at A094, UST

17 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 17 of 46 Ex. 15 at A103, UST ; Ex. 16 at A140, UST Under these circumstances and in light of the many patently improper privilege assertions discussed below the Court should direct Defendant to re-review all of the documents it has withheld for privilege, applying the proper legal standards as clarified by the Court in response to this motion. See Cornejo v. Mercy Hosp. and Med. Ctr., 2014 WL , at *1 (N.D. Ill. Sept. 15, 2014) (observing that court had directed producing party to review more carefully the documents it was withholding as privileged); Khoshmukhamedov v. Potomac Elec. Power Co., 2012 WL , at *6 (D. Md. Apr. 17, 2012) (ordering producing party to re-review their privilege logs and the withheld documents in light of improper privilege claims). II. Defendant Has Not Properly Asserted the Deliberative Process Privilege, and Many of Its Deliberative Process Privilege Claims Are Overbroad or Without Legal Basis. As this Court has repeatedly observed, the deliberative process privilege should be construed narrowly in order to permit parties seeking discovery to obtain sufficient information. First Heights Bank, FSB v. United States, 46 Fed. Cl. 827, 829 (2000); see also, e.g., Dairyland Power Coop. v. United States, 79 Fed. Cl. 709, 720 (2007) ( Dairyland Power II ) ( [T]he deliberative process privilege is to be narrowly construed. ). The purpose of this privilege is to enhance the quality of agency decisions, by protecting open and frank discussion among those who make them within the Government, not to further the litigation strategy of counsel. Pacific Gas & Elec. Co. v. United States, 70 Fed. Cl. 128, 144 (2006) (citation omitted) (internal quotation marks omitted) ( Pacific Gas I ). It is well-settled that the party claiming [this] privilege bears the burden of establishing its entitlement to it. Dairyland Power II, 79 Fed. Cl. at To withhold materials under the deliberative process privilege, the Government thus must demonstrate on a document-by-document basis that the materials it wishes to withhold are both 10

18 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 18 of 46 predecisional and deliberative, see, e.g., Walsky Constr. Co. v. United States, 20 Cl. Ct. 317, 320 (1990). Defendant has claimed the deliberative process privilege to protect communications among senior government officials that are likely to belie Defendant s claims regarding its motives in implementing the Net Worth Sweep. As explained above, Plaintiffs have reason to believe that Defendant s invocation of this and other privileges in this litigation has often been arbitrary, inconsistent, or improper. For that reason, and for the reasons set forth below, this Court should order Defendant to produce the documents identified in Exhibit 1 that Defendant withheld under the deliberative process privilege as well as other documents Defendant has withheld without proper legal basis. In the alternative, this Court should review the documents listed in Exhibit 1 in camera to determine whether Defendant s assertions of privilege are proper and, even if they are, whether the withheld documents should nevertheless be released to Plaintiffs in light of their pressing need for these documents and the public interest in fair and accurate factfinding in this important case. A. Defendant Has Not Properly Asserted the Deliberative Process Privilege. Defendant s assertion of the deliberative process privilege is flawed at the wholesale level because Defendant has yet to provide Plaintiffs with the required affidavits from the relevant agency heads or their delegates. See Walsky, 20 Cl. Ct. at 320 ( [T]he head of the agency that has control over the requested document [or his delegate] must assert the privilege after personal consideration. ). The purpose of this requirement is to ensure that those officials with expertise in the nature of the privilege claim and documents at issue... determine whether the public interest in confidentiality outweighs the public interest in disclosure, Alpha I, LP ex rel. Sands v. United States, 83 Fed. Cl. 279, (2008) (alteration in original) (internal quotation marks omitted) 11

19 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 19 of 46 something that government trial counsel is not qualified to do. Requiring that government officials, rather than government counsel, ma[ke] the decision to assert the deliberative process privilege, Pacific Gas & Elec. Co. v. United States, 71 Fed. Cl. 205, 208 (2006) ( Pacific Gas II ), ensure[s] that the privilege is invoked as a result of an executive decision about the exigencies of executive management, rather than as a result of trial counsel s decision about a desirable litigation strategy, Pacific Gas I, 70 Fed. Cl. at 135. None of Defendant s assertions of the deliberative process privilege are proper without affidavits from the relevant agency heads or their delegates, see Marriott Int l Resorts, LP v. United States, 437 F.3d 1302, (Fed. Cir. 2006), and the Court should therefore order Defendant to produce the documents it has withheld under the deliberative process privilege. Any belated attempt by Defendant to satisfy the agency affidavit requirement for example, by attaching affidavits to its response to Plaintiffs motion at a minimum erod[es] the credibility of [its] claim of the privilege and makes it appropriate for the Court to apply heightened scrutiny to the government s assertion of the deliberative process privilege. Pacific Gas II, 71 Fed. Cl. at 208; see Confidential Informant v. United States, 108 Fed. Cl. 121, (2012) ( [T]he time to make the showing that certain information is privileged is at the time the privilege is asserted, not months later when the matter is before the Court on a motion to compel. ). That is because the agency affidavit requirement is supposed to assure the Court that someone from the agency ideally, an official not directly responsible for or involved in... this case, Marriott Int l Resorts, 437 F.3d at 1308 has independently determined at the time the privilege is claimed that the materials in question should not be produced. Accordingly, blind assertion of the privilege... totally defeats the purpose behind the formal claim requirement, Martin v. Albany Bus. Journal, Inc., 780 F. Supp. 927, 936 (N.D.N.Y. 1992), as does a 12

20 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 20 of 46 perfunctory and pro forma affidavit signed by an agency official only after government counsel has decided what to withhold, Chao v. Westside Drywall, Inc., 254 F.R.D. 651, 657 (D. Or. 2009). The assertion of the deliberative process privilege ordinarily calls for support by an affidavit from an agency official at the time the privilege is first asserted, Alpha I, 83 Fed. Cl. at 290 (emphasis added), and Defendant s failure to do so here seriously undermines the value of any affidavits it may now submit. B. The Deliberative Process Privilege Does Not Protect Evidence of Defendant s Purposes, Intentions, and Motivations. Moreover, many of the documents withheld under the deliberative process privilege that are identified in Exhibit 1 would likely reveal important information about Defendant s purpose and/or motivation for imposing the Net Worth Sweep, and such information may not be withheld under the deliberative process privilege. For example, Plaintiffs expect that these and other documents listed in Exhibit 1 would corroborate Ms. McFarland s testimony that 45:11 13 (A057) (McFarland: See Ex. 9 at 13

21 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 21 of 46. If this is true, it would demonstrate that the reason why the Government effectively nationalized Fannie and Freddie was not, as the Government has claimed in its briefing, to prevent a death spiral in which the enterprises would fai[l] to generate enough revenue to fund the 10-percent dividend obligation and be required to dra[w] on the Treasury commitment to pay Treasury its fixed dividend, which, in turn, [would] increase[ ] Treasury s total investment and the next quarterly dividend. Def. s Mot. to Dismiss at 9 10 (Dec. 9, 2013), Doc. 20 ( Def. s MTD ). Rather, these documents would demonstrate that the Government s decision was driven by the fact that Fannie and Freddie were poised to generate tens of billions of dollars in profit over and above their existing dividend obligations money that could go toward rebuilding Fannie s and Freddie s capital reserves for potential exit from conservatorship and that could benefit shareholders other than Treasury. Defendant, however, was determined to keep Fannie and Freddie under government control and to ensure that shareholders other than Treasury would be wiped out. See Thus, we believe that the withheld documents will likely show that the purpose of the Net Worth Sweep was to expropriate for the government every last dollar of the substantial profits and massive deferred tax asset valuation allowance releases that were anticipated in the near future, to prevent Fannie and Freddie from rebuilding capital and exiting conservatorship, and to ensure that Fannie s and Freddie s private shareholders received no value whatsoever for their investment. 14

22 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 22 of 46 As numerous courts have held, the deliberative process privilege does not apply when the Government s decision-making process and intent is the subject of the litigation. Discovery Order No. 6 at 6 (A163), Starr Int l Co. v. United States, No C (Fed. Cl. Nov. 6, 2013), ECF No. 182 (attached as Ex. 21) ( Starr Order ); see also, e.g., id. ( [T]he deliberative process privilege is unavailable... when a plaintiff s cause of action is directed at an agency s subjective motivation. ); In re Subpoena Duces Tecum Served on Office of Comptroller of Currency, 156 F.3d 1279, 1279 (D.C. Cir. 1998) ( [T]he government s deliberative process privilege does not apply when a cause of action is directed at the government s intent. ); Dunnet Bay Constr. Co. v. Hannig, 2012 WL , at *3 (C.D. Ill. May 7, 2012) ( The deliberative process privilege, however, does not apply when the lawsuit puts at issue the intent of the officials making the governmental policy decision.... In such circumstances, the deliberative process privilege must yield to the interests of determining the governmental agents intent. ); Scott v. Board of Educ. of the City of East Orange, 219 F.R.D. 333, 337 (D.N.J. 2004) ( [W]hen the deliberations of a government agency are at issue, the Privilege is not available to bar disclosure of such deliberations. ). 6 Rather, the deliberative process privilege applies only when the government 6 In the parties discussions regarding this issue, Defendant has cited First Heights Bank, 46 Fed. Cl. at , as support for its position that the deliberative process privilege shields documents relevant to the Government s motivations. While it is true that the First Heights Bank court favored a case-by-case assessment of need over an automatic bar on assertions of deliberative process privilege in any case where the Government s intent is potentially relevant, id. at 322, that court s analysis makes clear that the parties dispute over the Government s intent was a critical factor in its ultimate conclusion that the plaintiffs had made the necessary showing to overcome the qualified privilege, id. Thus, to the extent that the Court follows First Heights Bank rather than the numerous contrary cases cited in the text, the parties dispute over Defendant s true reasons for imposing the Net Worth Sweep weighs heavily in favor of finding that Plaintiffs have demonstrated sufficient need to overcome the deliberative process privilege. In any event, rather than following First Heights Bank, Plaintiffs submit that this Court should follow Judge Wheeler s carefully reasoned and more recent opinion in Starr and rule that Defendant may not use the deliberative process privilege to shield documents that are probative of its purposes, intentions, and motivations for imposing the Net Worth Sweep. 15

23 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 23 of 46 decisionmaking process is collateral to a plaintiff s claim. In re Subpoena Duces Tecum Served on the Office of Comptroller of Currency, 156 F.3d at 1279 (emphasis omitted). Here, the Government s decision-making process is not collateral indeed, Defendant has made its alleged purposes and motivation in adopting the Net Worth Sweep central to its defense. Thus, to the extent that the documents identified in Exhibit 1 are probative of the reasons why the Government imposed the Net Worth Sweep, the deliberative process privilege cannot shield them from discovery. C. Defendant s Litigating Position that FHFA Is Not the United States Precludes It from Withholding FHFA Documents Under the Deliberative Process Privilege. Many of Defendant s assertions of the deliberative process privilege are also improper for an additional reason: Defendant has consistently protested that FHFA is not the United States. It follows that Defendant should be precluded from asserting the deliberative process privilege a privilege that belongs exclusively to the Government over documents created by or shared with FHFA. The deliberative process privilege is a shield which the executive branch may use to deflect public scrutiny away from its internal decision making process. Starr Order at 6 (A163). It protects only inter-agency or intra-agency documents. Disclosure to a non-agency third party waives the privilege. Id. at 11 (A168). The Government has argued in its motion to dismiss Plaintiffs taking claim that FHFA is not the United States when it acts as conservator. Def. s MTD at 12. This is what it said to this Court: Plaintiffs claims against FHFA and its actions as conservator are effectively claims against Fannie Mae and Freddie Mac neither of which are alleged to be [a] Government entity.... By suing the conservatorships, [P]laintiffs... are effectively suing private corporations for the decisions of their management. Id. at 14. Defendant s position thus should preclude it from now asserting the deliberative process privilege 16

24 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 24 of 46 as to any communication or document to which Fannie or Freddie, or FHFA as their conservator, was a party or recipient. At the June 19, 2014 status conference, the Court summed up the conflict inherent in Defendant s assertion of the privilege over FHFA documents, observing: On one hand, FHFA is a government entity, you know, for purposes of booting the Plaintiffs out of court and not part of the Government, but for purposes of forwarding discovery, all of a sudden deliberative process is appropriate because they are part of the Government. So, it s a schizophrenic approach and I m just waiting to hear a reasonable explanation. Transcript of June 19, 2014 Status Conference at 24 (A175), attached as Ex. 22. Defendant can hardly assert as a defense to Plaintiffs taking claim that FHFA as conservator is not a government agency and then turn around and assert a privilege available only to government agencies to prevent Plaintiffs from discovering information necessary to prove the contrary. And while Defendant might argue that Plaintiffs position is also inconsistent as to whether FHFA should be treated as the United States for purposes of this litigation, that argument ignores the fact that it is Defendant s burden of persuasion to show that the privilege applies to FHFA documents. Dairyland Power II, 79 Fed. Cl. at Thus, to sustain its deliberative process assertion, Defendant must demonstrate that FHFA was acting as an agency of the federal government Plaintiffs position is irrelevant. And since Defendant affirmatively disclaims that FHFA was acting in that capacity, its assertion of deliberative process privilege for FHFA documents necessarily fails. Accordingly, the Court should issue an order making clear that Defendant may not withhold documents reviewed by FHFA or the Companies on the basis of the deliberative process privilege. 17

25 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 25 of 46 D. The Deliberative Process Privilege Does Not Protect Documents That Discuss the Net Worth Sweep After It Was Imposed. As this Court has already observed, to be exempt from disclosure under the deliberative process privilege, the government must show that the information is pre-decisional. Opinion & Order at 3 (July 16, 2014), Doc. 72. Defendant has nevertheless acknowledged withholding documents created or transmitted after August 16, 2012 the day Defendant decided to impose the Third Amendment 7 on the theory that it may assert the deliberative process privilege with respect to communications that post-date a decision if the communications recount Government employees views of the proposed decision before the decision was adopted. Ex. 2 at A015. Although Plaintiffs cannot be certain because they have not reviewed the documents in question, several documents listed in Exhibit 1 appear to be examples of documents withheld on that basis. See UST ; UST ; UST But the better view is that a document is only predecisional for purposes of the deliberative process privilege if it precedes, in temporal sequence, the decision to which it relates. Abramson v. United States, 39 Fed. Cl. 290, 294 (1997); see Dobyns v. United States, -- Fed. Cl. --, 2015 WL , at *7 (June 19, 2015) (document predecisional only if it was created to assist the agency in the formulation of a specific decision on policy ). Thus, documents that merely express opinions about past agency decisions are not predecisional. See Confidential Informant , 108 Fed. Cl. at 140 (document reflecting facts about past actions and decisions was not privileged); United States v. Hooker Chems. & Plastics Co., 123 F.R.D. 3, 43 (W.D.N.Y. 1988) ( [O]nce the decisionmaker has reached 7 18

26 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 26 of 46 a conclusion and the process is over, the post-decisional views of subordinates about that decision are not within the scope of the [deliberative process] privilege. ). Defendant has taken a contrary position on the strength of Ford Motor Co. v. United States, 94 Fed. Cl. 211, 223 (2010), which said that materials created after a decision which recount predecisional deliberations are covered by the [deliberative process] privilege. But this Court s cases are not consistent in adopting that approach; again, other opinions of this Court say that a document is predecisional only if it precedes, in temporal sequence, the decision to which it relates, Abramson, 39 Fed. Cl. at 294, and was created to assist the agency in the formulation of a specific decision on policy, Dobyns, -- Fed. Cl. --, 2015 WL , at *7. That is clearly the better view, for an exception permitting the Government to withhold materials created after adoption of agency policy that recount pre-decisional deliberations would swallow the well-established rule that a document must be both deliberative and predecisional to be covered by the privilege. See In re United States, 321 F. App x 953, 958 (Fed. Cir. 2009) ( Generally, to be exempt from disclosure under the deliberative-process privilege, the government must show that the information is predecisional and deliberative. (emphasis added)). Moreover, as the Supreme Court has explained, the ultimate purpose of the deliberative process privilege is to prevent injury to the quality of agency decisions, and it is difficult to see how the quality of a decision will be affected by communications with respect to the decision occurring after the decision is finally reached. NLRB v. Sears, Roebuck & Co., 421 U.S. 132, 151 (1975); see Texaco Puerto Rico, Inc. v. Department of Consumer Affairs, 60 F.3d 867, (1st Cir. 1995) ( Because the deliberative process privilege is restricted to the intra-governmental exchange of thoughts that actively contribute to the agency s decisionmaking process,... postdecisional documents explaining or justifying a decision already made are not shielded. ). Where 19

27 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 27 of 46 an agency decision has already been made, preserving the confidentiality of internal agency communications about the decision even communications that recount earlier deliberations does nothing to enhance the quality of agency decision making. In view of the deliberative process privilege s purpose and this Court s repeated admonitions that the privilege should be construed narrowly, see, e.g., Dairyland Power II, 79 Fed. Cl. at 720, the Court should rule that Defendant may not use the privilege to withhold documents that discuss deliberations over the Third Amendment that were created after August 16, E. The Deliberative Process Privilege Does Not Protect Financial Projections, Models, or Other Materials that Contain Only Non-Deliberative Factual Information. Despite the well-established rule that the deliberative process privilege only shields materials that are deliberative, see Opinion & Order at 3 (July 16, 2014), Doc. 72, Defendant also appears to have withheld a significant number of documents that contain non-deliberative, factual material. For example, Defendant asserted privilege over numerous financial models and other assessments of the Companies financial performance. E.g., UST ; UST ; FHFA ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST Such assessments do not make recommendations or express opinions on legal or policy matters and therefore do not qualify as deliberative for purposes of the deliberative process privilege. Confidential Informant , 108 Fed. Cl. at 135. Defendant has nevertheless taken the position that financial models and projections are deliberative, selectively disclosing projections that it considers helpful to its case while withholding others. See Ex. 2 at A025 ( There are numerous examples of projections for which we have previously waived privilege available in the Administrative Record from the district court 20

28 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 28 of 46 action and in documents we have produced in this action. ). But numerous cases hold that technical models, data, and projections of this sort are not deliberative and therefore may not be withheld under the deliberative process privilege. See, e.g., Lahr v. National Transp. Safety Bd., 453 F. Supp. 2d 1153, 1189 (C.D. Cal. 2006) (graphs depicting results of agency computer simulations of plane crash were factual and not deliberative), rev d and remanded in part on other grounds, 569 F.3d. 964 (9th Cir. 2009); Reilly v. United States EPA, 429 F. Supp. 2d 335, (D. Mass. 2006) (EPA computer model runs were not deliberative); Carter v. United States Dep t of Commerce, 186 F. Supp. 2d 1147, (D. Or. 2001) (results of statistical adjustments to census data were not deliberative). The Court should follow those carefully reasoned opinions and rule that Defendant may not withhold financial data, models, or projections under the deliberative process privilege. Defendant also appears to have withheld documents in full, such as which very likely include segregable factual information. See Ex. 24 at A180, UST The same is true of UST , See Ex. 25 at A182, UST To be sure, factual information that itself reveals the deliberative process and cannot be severed from the deliberative context is protected. In re United States, 321 F. App x at 959. But many of the documents listed in Exhibit 1 appear to contain segregable factual or other non-deliberative information. The Court should order Defendant to produce these documents listed in Exhibit 1. At a minimum, it should review those documents in camera to assess Defendant s application of the privilege. 21

29 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 29 of 46 F. Plaintiffs Need and the Public Interest Outweigh Any Legitimate Interest Defendant May Have in Nondisclosure. Finally, Plaintiffs respectfully submit that even if Defendant s invocations of the deliberative process privilege were otherwise proper, any harm that Defendant might suffer from disclosure is outweighed not only by Plaintiffs evidentiary need for the withheld documents but also by the public interest in open and transparent government and in fair and accurate factfinding in this case. Documents listed in Exhibit 1 include materials discussing Defendant s decision to impose the Net Worth Sweep, e.g., UST , UST , the Office of Management and Budget s review of the Net Worth Sweep and its anticipated impact on the federal budget, e.g., UST , UST , and Defendant s assessment of the Companies financial outlook when the Net Worth Sweep was imposed, e.g., UST , UST Such documents go to the heart of the disputed factual issues before the Court. To the extent that the Court concludes that the following three categories of withheld documents are subject to the deliberative process privilege despite Plaintiffs arguments to the contrary, Plaintiffs submit that their need is sufficient to overcome the privilege: (1) materials revealing Defendant s purposes, intentions, and motivations for imposing the Net Worth Sweep; (2) materials that concern the Net Worth Sweep created after it was imposed; and (3) financial data, projections, and models that relate to the Companies condition and future profitability. As this Court has already correctly held, A claim of deliberative process privilege, even when properly established, is not absolute. Marriott Int l Resorts, L.P. v. United States, 437 F.3d 1302, 1307 (Fed. Cir. 2006). Rather, the privilege is qualified, and subject to judicial oversight. Id. After the government makes a sufficient showing of entitlement to the privilege, the court should balance the competing interests of the parties. Scott Paper Co. v. United States, 943 F. Supp. 489, 496 (E.D. Pa. 1996) (citing omitted). Plaintiffs may overcome the privilege by making a showing of evidentiary need... that outweighs the harm that disclosure of such information may cause to the defendant. [Pacific Gas I], 70 Fed. Cl. [at]

30 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 30 of 46 Opinion & Order at 3 (July 16, 2014), Doc. 72; see also, e.g., Dairyland Power II, 79 Fed. Cl. at 719; Dairyland Power Coop. v. United States, 77 Fed. Cl. 330, (2007) ( Dairyland Power I ); First Heights Bank, 46 Fed. Cl. at 829. Thus, even where the Government asserts privilege over deliberative, predecisional documents, [s]trong competing interests must be weighed against the government s interest in nondisclosure. Foremost is the interest of the litigants, and ultimately of society, in accurate judicial fact finding. Scott Paper Co., 943 F. Supp. at 496; see also, e.g., Dairyland Power I, 77 Fed. Cl. at 336. Other factors frequently considered in balancing the competing interests of the parties include: (1) the relevance of the documents to the litigation; (2) the availability of other evidence that would serve the same purpose as the documents sought; (3) the government s role in the litigation; (4) the seriousness of the litigation and the issues involved in it; and (5) the degree to which disclosure of the documents sought would tend to chill future deliberations within government agencies, that is, would hinder frank and independent discussion about governmental policies and decisions. Pacific Gas II, 71 Fed. Cl. at 210 n.6; see also, e.g., Dairyland Power I, 77 Fed. Cl. at 338, ; Scott Paper Co., 943 F. Supp. at 496. Here, all of these factors plainly weigh in favor of disclosure. The interest of the litigants, and ultimately of society, in accurate judicial fact finding is especially strong here, given that the documents in question may well undermine the accuracy and even the veracity of the Government s representations regarding the purpose of the Net Worth Sweep. The documents that Plaintiffs seek are also relevant to the litigation indeed, they are likely directly probative of central issues on which this Court granted discovery, including whether FHFA should be treated as the United States for purposes of the Tucker Act, Order at 3 (Feb. 26, 2014), Doc. 32, and the reasonableness of expectations about [Fannie and Freddie s] future profitability, id. at 4. Materials, like these documents, that likely bear directly on the factual assertions made by Defendant must be fully disclosed to enable the court to make... finding(s) on the validity of 23

31 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 31 of 46 th[e] defense[s] defendant asserts. Order, Yankee Atomic Electric Co. v. United States, No C (Fed. Cl. Aug. 25, 2003), ECF No. 719 (as quoted in Pacific Gas II, 71 Fed. Cl. at 214). Moreover, given that Defendant s reasons for imposing the Net Worth Sweep and its assessment of the Companies future prospects are central to issues in this litigation, Plaintiffs respectfully submit that no other available evidence would equally serve the same purpose. The government s role in this litigation likewise supports disclosure. Here, the Government is not a disinterested third party. Rather the Government is a party to this litigation and is the party that seeks to benefit from the invocation of the deliberative process privilege. Dairyland Power I, 77 Fed. Cl. at 342. Given the Government s immense stake in the outcome of this litigation, its invocation of the deliberative process privilege must be carefully scrutinized to ensure that the privilege retains its proper narrow scope. Id. Nor can there be any reasonable dispute regarding the seriousness of this litigation and the issues involved in it. Plaintiffs challenge the Government s seizure of all of the existing net worth and future profits of two of the largest and most profitable publicly owned corporations on earth. This decision has already allowed the government to expropriate over $100 billion. As significant private shareholders of those corporations, Plaintiffs seek substantial damages as just compensation. Id. In addition, the decisions in this case may have broad implications for other litigation as well as executive and legislative branch policy repercussions. Id. For this lawsuit calls into question the propriety and integrity of the government s policies and actions, as well as the veracity of its explanation and defense of those policies and actions in this (and other) Courts and in the public square. And where as here the documents sought may shed light on alleged government malfeasance, the privilege is routinely denied, for in such circumstances, weighty interests in due process and fairness plainly outweigh the Government s interest in shielding 24

32 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 32 of 46 its deliberations from public view. Texaco Puerto Rico, Inc., 60 F.3d at 885 (internal quotation marks omitted). In considering Defendant s interest in nondisclosure, this Court must focus on the public interest in confidentiality (as distinct from the government s interest in th[e] litigation). Pacific Gas I, 70 Fed. Cl. at 142 (alteration in original). And that interest is not weighty here. As an initial matter, Defendant has not been shy about disclosing details about its deliberations when it believes that doing so will further its narrative concerning the Net Worth Sweep. Thus, despite Defendant s position that financial projections are privileged, Defendant s administrative record in the D.D.C. action publicly disclosed several sets of internal Treasury financial projections that purport to show that the Net Worth Sweep was necessary because the Companies could not afford to continue paying 10% cash dividends under their original arrangements with Treasury. See, e.g., Ex. 26 at A184; Ex. 27 at A215. While Plaintiffs believe that those projections are highly misleading and do not accurately reflect Defendant s actual reasons for imposing the Net Worth Sweep, the key point for present purposes is that Defendant selectively disclosed materials that it claims are privileged for the purpose of strengthening its position in this and related litigation. Defendant s decision to release such materials despite its claim of privilege highlights the fact that Defendant itself believes that prevailing in this litigation is more important than preventing any negative long-term effect that disclosure of its deliberations would have on the frankness of internal agency deliberations. With Defendant having shown little concern for safeguarding materials it considers deliberative when release of such materials suits its purposes, the public s interest in the confidentiality of agency deliberations (as distinct from Defendant s interest in winning this case) deserves little weight. 25

33 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 33 of 46 Furthermore, even if the Court sets aside Defendant s intentional disclosures and gives the benefit of every reasonable doubt to Defendant s decision to assert the privilege in the first instance, the documents at issue implicate only governmental deliberations about commercial and economic policy matters not diplomatic or national security deliberations, the confidentiality of which is especially important. Cf. First Heights Bank, 46 Fed. Cl. at 829. Moreover, any documents that this Court orders disclosed will be subject to the existing protective order in this litigation. Dairyland Power I, 77 Fed. Cl. at 339. Not only does the protective order sharply limit the individuals who are permitted access to protected information, see Second Amended Protective Order 4 (Nov. 9, 2015), Doc. 256, it also limits the use of this information to litigation purposes, see id. 3. And it expressly provides that Protected Information shall not be used for any business, commercial, competitive, or personal purpose. Id. Where, as here, disclosure will be subject to a protective order, limited disclosure of deliberative process documents should be less likely to result in significant harm to policy debates within an agency. Dairyland Power I, 77 Fed. Cl. at 339; see also, e.g., Dairyland Power II, 79 Fed. Cl. at 720 ( The strict terms of the protective order in effect in this case is a factor in Dairyland s favor in these determinations. ); Pacific Gas II, 71 Fed. Cl. at 214 n. 9 ( In weighing the parties interests, the court keeps in mind that any need the government might have for confidentiality... is diminished by the fact that the court has issued a Protective Order in this case.... ) (quoting Pacific Gas I, 70 Fed. Cl. at 142 n.12) (first omission in original). Finally, Defendant s interest in non-disclosure is especially weak with respect to one category of materials that Plaintiffs seek: responsive materials that post-date the Net Worth Sweep. Even if the Court agrees with Defendant that materials that post-date the Net Worth Sweep can nevertheless somehow be pre-decisional, the disclosure of such materials could not conceivably 26

34 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 34 of 46 harm the quality of agency decision making. The only internal agency communications that can affect an agency s decision are those that occur before the agency makes up its mind. Agency officials simply do not need this Court to shield their after-the-fact communications from disclosure in order to be assured that their discussions about pending agency decisions will generally remain confidential. At the end of the day, the deliberative process privilege is a discretionary one, and [i]n deciding how to exercise its discretion, an inquiring court should consider, among other things, the interests of the litigants, society s interest in the accuracy and integrity of factfinding, and the public s interest in honest, effective government. Texaco Puerto Rico, 60 F.3d at 885 (internal quotation marks omitted). As demonstrated above, all of these considerations support disclosure here. III. The Bank Examination Privilege Is Not Available in This Case, and in Any Event Defendant s Assertions of the Privilege Are Overbroad and Improper. The bank examination privilege is a judge-made, qualified evidentiary privilege that shields examination reports and other communications between banks and their regulators. Although this Court has never recognized the bank examination privilege, other courts have concluded that it is needed to provide protection for the banking industry by promoting and protecting the integrity of candid relations between banks and government regulatory agencies. In re Bank One Sec. Litig., 209 F.R.D. 418, 426 (N.D. Ill. 2002). The privilege s rationale thus rests on the premise that bank regulation is an iterative process, the success of which depends on extensive and informal communications that would suffer if subjected to routine disclosure in litigation. In re Subpoena Served Upon Comptroller of the Currency, 967 F.2d 630, (D.C. Cir. 1992) (hereinafter Fleet Bank ). As one court recently recognized, however, there is good reason to doubt that bank examination truly involves the frank and informal exchange of 27

35 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 35 of 46 views that proponents of the privilege assume. Wultz v. Bank of China, Ltd., 61 F. Supp. 3d 272, (S.D.N.Y. 2013). Nor is it likely that the availability of such a privilege will succeed in promoting open and honest communications by bank officers to their regulators if the threat of federal criminal prosecution has failed to do so. See 18 U.S.C. 1001, 1005, But this Court ultimately need not concern itself with the wisdom of recognizing a privilege that shields communications between privately run banks and their examiners, for it is inapplicable here in any event. And even if it was, like all judicially created privileges, the bank examination privilege must be construed narrowly, see University of Pa. v. EEOC, 493 U.S. 182, 189 (1990); Pearson v. Miller, 211 F.3d 57, 67 (3d Cir. 2000), and Defendant s assertions of the privilege go well beyond its accepted bounds. Defendant has withheld over 2,000 FHFA documents on the basis of the bank examination privilege, many of which were created after FHFA began operating the Companies as their conservator. But Fannie and Freddie are not banks, and any concern that they might not be entirely forthcoming with FHFA certainly disappeared once the Companies were placed in conservatorship and thereby subjected to FHFA s complete control. And even if the Court concludes that FHFA may, under some circumstances, invoke the bank examination privilege, Defendant has withheld numerous documents that do not appear to fit within the privilege s limits or that otherwise should have been disclosed. Thus, at an absolute minimum, the Court should review the bank examination documents identified in Exhibit 1 in camera to independently assess whether they have been properly withheld. A. FHFA s Communications with the Companies Are Ineligible for the Bank Examination Privilege Because the Companies Are Not Banks. The bank examination privilege protects communications between banks and banking regulatory agencies, and Fannie and Freddie are not banks. They hold no bank charter of any kind, 28

36 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 36 of 46 they do not retain customer deposits, and they do not otherwise conduct banking activities. Indeed, the Companies function much like insurance companies that guarantee mortgages against the risk of default. These facts alone are enough to defeat Defendant s assertions of the bank examination privilege over FHFA documents in this case, for there is no regulated entity examination privilege that extends to non-banks. Communications involving insurance companies, brokerdealers, mutual funds, and other regulated non-bank participants in the financial markets are not covered by the bank examination privilege, and there is no reason to treat Fannie and Freddie differently than other such non-bank entities. See, e.g., Lawrence E. Jaffe Pension Plan v. Household Int l, Inc., 239 F.R.D. 508, 514 n.5 (N.D. Ill. 2006) (rejecting assertions of bank examination privilege because it is undisputed that the regulated entities at issue here are not banks ); In re Putnam Inv. Mgmt., LLC, 2004 WL , at *3 *4, SEC Release No. 614 (SEC Apr. 7, 2004) (declining to recognize an SEC Examination Privilege ); see also Merchants Bank v. Vescio, 205 B.R. 37, 42 (D. Vt. 1997) ( The bank examination privilege belongs solely to the FDIC, the Federal Reserve, and other banking regulatory entities. (emphasis added)). To be sure, one court has extended the bank examination privilege to FHFA, reasoning that Fannie and Freddie are, in certain respects, similar to banks. See FHFA v. JPMorgan Chase & Co., 978 F. Supp. 2d 267, (S.D.N.Y. 2013). But the fact that FHFA is charged with promoting public confidence in the Companies by examining the soundness of their investments and capital levels does not make the Companies banks any more than similar aspects of insurance regulation mean that insurance companies are banks. If accepted, the JPMorgan Chase court s reasoning would thus expand the bank examination privilege far beyond its accepted bounds and shield from the judicial truth-finding process a wide range of materials related to financial regulation that have never been understood to be privileged. Furthermore, unlike bank regulators, FHFA is required by 29

37 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 37 of 46 law to report to Congress on its examinations of the Companies, and its reports are publicly available. See 12 U.S.C. 4521(a); FHFA, Reports and Plans, (links to FHFA s Annual Report to Congress); see also FHFA, FHFA Answers to the PWG Working Group on Supervision Questionnaire A232 (Apr. 29, 2010) (attached as Ex. 28) ( Unique among federal financial regulators, FHFA is required by statute to report publicly the results of its annual examinations to Congress. ). With the Companies not functioning as banks and the results of FHFA s examinations already in the public domain, there is no basis for extending the bank examination privilege to communications between FHFA and the Companies. 8 B. FHFA s Communications with the Companies During Conservatorship Are Not Protected by the Bank Examination Privilege. Even if the Court determines that FHFA examiners communications with the Companies are shielded by the privilege during ordinary times, it should not further extend the privilege to communications that occurred after September 6, 2008, when the Companies were placed into conservatorship. As explained above, the purpose of the privilege is to ensure that banks are open and forthcoming in response to the inquiries of bank examiners, Fleet Bank, 967 F.2d at 634, and any concern that the Companies might not be entirely forthcoming with FHFA evaporated when FHFA took them over. As conservator, FHFA has exercised complete control over the Companies. See 12 U.S.C. 4617(b)(2)(A) (D). It has determined their strategic direction, selects their 8 In holding that FHFA could invoke the bank examination privilege, the JPMorgan Chase court also pointed to 12 U.S.C. 4525, which extends the Freedom of Information Act ( FOIA ) exemption for bank examination materials to the Companies submissions to FHFA. 978 F. Supp. 2d at But it is well settled that [t]he Freedom of Information Act creates no privileges, Chamber of Commerce of United States v. Legal Aid Soc y of Alameda Cnty., 423 U.S. 1309, 1310 (1975), and Congress has in the past considered and rejected bills that would have entitled OFHEO, FHFA s predecessor, to invoke the bank examination privilege, see Financial Services Antifraud Network Act of 2001, H.R. 1408, 107th Cong. (2001). Treatment of the Companies documents under FOIA thus provides no support for permitting FHFA to withhold relevant examination materials during discovery. 30

38 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 38 of 46 managers and directors, and participates in their day-to-day operations. A review of the Companies SEC filings confirms this reality and further reveals that the Companies FHFAinstalled managers consider themselves to be fiduciaries of FHFA, not the Companies or their investors. See Fannie Mae 2014 Annual Report at 1 (Form 10-K) (Feb. 20, 2015), ( Our directors do not have any fiduciary duties to any person or entity except to the conservator and, accordingly, are not obligated to consider the interests of the company, [or] the holders of our equity or debt securities... unless specifically directed to do so by the conservator. ); Freddie Mac 2014 Annual Report at 20 (Form 10-K) (Feb. 19, 2015), ( The Conservator continues to determine, and direct the efforts of the Board of Directors and management to address, the strategic direction for the company... [M]anagement frequently receives directions from FHFA on various matters involving day-to-day operations. ). Because evidentiary privileges invariably suppress probative evidence, they must be extended only as far as needed to effectuate their utilitarian purposes. Evergreen Trading, LLC ex rel. Nussdorf v. United States, 80 Fed. Cl. 122, 127 (2007); see Ullmann v. United States, 350 U.S. 422, (1956) ( Once the reason for the privilege ceases, the privilege ceases. ). With the Companies subject to FHFA s complete control and operating under management chosen by and avowedly beholden as fiduciaries only to FHFA, the concern that underlies the bank examination privilege that privately run banks might not be forthcoming with their regulators plainly does not apply here. Indeed, during conservatorship, communications between FHFA and the Companies are more akin to internal Company communications, and it would stretch the bank examination privilege well beyond any legitimate purpose to hold that such communications are privileged. For that reason, the Court should rule that the Companies communications with FHFA examiners during conservatorship are not subject to the bank examination privilege. 31

39 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 39 of 46 C. Even If the Bank Examination Privilege Applies, the Court Should Review a Subset of Bank Examination Materials To Determine Whether Defendant Properly Withheld Them. Courts that recognize the bank examination privilege hold that the privilege shields from discovery only agency opinions or recommendations; it does not protect purely factual material. Fleet Bank, 967 F.2d at 634; see also, e.g., Schreiber v. Society for Sav. Bancorp, Inc., 11 F.3d 217, 220 (D.C. Cir. 1993) (bank examination privilege does not apply to documents primarily factual in nature ). Where it is possible to redact deliberations and opinions and disclose a document s relevant factual content, the bank regulator must do so. Schreiber, 11 F.3d at 220. As with Defendant s assertions of the deliberative process privilege, it is apparent that Defendant did not consistently and faithfully observe the fact-opinion distinction when deciding what to withhold under the bank examination privilege. Notably, Defendant withheld a number of projections, models, and other financial analyses that undoubtedly include factual information about the Companies financial performance. Plainly, Fannie s capital results are factual in nature and therefore cannot be withheld under the bank examination privilege. suggest that the following documents also include factual information that should have been produced: FHFA , FHFA , FHFA , FHFA , FHFA , FHFA , FHFA , FHFA The Court should review these documents in camera and order Defendant to disclose them to the extent that they contain factual information. In addition, the bank examination privilege, like the deliberative process privilege, is qualified; a court may order disclosure of materials covered by the privilege where doing so would 32

40 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 40 of 46 further the public s interest in effective government. Fleet Bank, 967 F.2d at 634. In deciding whether materials subject to the privilege should be disclosed, courts consider many of the same factors relevant to overcoming the qualified deliberative process privilege: (i) the relevance of the evidence sought to be protected; (ii) the availability of other evidence; (iii) the seriousness of the litigation and the issues involved; (iv) the role of the government in the litigation; and (v) the possibility of future timidity by government employees who will be forced to recognize that their secrets are violable. Id. (quoting In re Franklin Nat l Bank Sec. Litig., 478 F. Supp. 577, 583 (E.D.N.Y. 1979)). A number of the documents listed in Exhibit 1 appear to speak directly to the issues at the heart of this litigation and therefore should be disclosed under that standard. For example, the documents listed at FHFA , FHFA , FHFA , and FHFA are See Ex. 30 at A237, FHFA Similarly, FHFA reflects FHFA s September 2011 projections of the Companies remaining... Treasury funding commitment under FHFA stress scenarios a key issue because according to Defendant s death spiral narrative, it imposed the Net Worth Sweep out of concern that the Companies would otherwise exhaust Treasury s funding commitment. See Ex. 1. And FHFA is See Ex. 31 at A , FHFA to FHFA _0016. FHFA s assessment of the Companies deferred tax assets at the beginning of the conservatorships is critical to this case because the decision to write down those assets caused the bulk of the Companies paper losses during the early years of conservatorship losses that were subsequently offset by massive profits when the Companies released the deferred tax asset reserves shortly after the Net Worth Sweep 33

41 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 41 of 46 went into effect. All of these materials are highly relevant to this dispute, and there is no adequate evidentiary substitute for FHFA s assessments of these issues. The other factors relevant to whether Plaintiffs can overcome the qualified bank examination privilege likewise support an order compelling Defendant to produce these documents. Billions of dollars are at stake in this case, and as the Defendant, the Government s motives for imposing the Net Worth Sweep have been called into serious question. See Wultz, 61 F. Supp. 3d at (overriding qualified bank examination privilege where hundreds of millions of dollars were at issue and there was no other way to obtain required information); In re Subpoena Duces Tecum Served Upon Office of Comptroller of Currency, 151 F.R.D. 1 (D.D.C. 1992) (qualified privilege was defeated where government s statements were allegedly false and misleading ). And any concern that disclosure of these materials might discourage banks from being forthcoming with their examiners in the future is greatly reduced by the fact that the materials at issue here were produced while the Companies were operating under conservatorship an unusual scenario that greatly weakens the justification for the bank examination privilege and distinguishes this case from most cases in which bank examination materials are relevant. Helping to further mitigate the risk that disclosure will have a chilling effect on future exchanges between banks and their regulators is the fact that under the terms of this Court s Protective Order these materials will not become public even if they are made available for purposes of this litigation. See Lundy v. Interfirst Corp., 105 F.R.D. 499, 502 (D.D.C. 1985) (ordering Comptroller of the Currency to turn over records submitted by bank in part because records were subject to protective order that would prevent public disclosure). To ensure that bank examiners do not have free reign to determine the scope of the privilege, courts commonly... examine... documents in camera before determining whether 34

42 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 42 of 46 they fall within the claimed privilege. Schreiber, 11 F.3d at 221. To the extent that the Court concludes that FHFA may invoke the bank examination privilege in this case even though the Companies are not banks and are subject to the total control of FHFA, the Court should review the bank examination documents identified in Exhibit 1 in camera. 9 IV. Defendant Should Be Ordered To Produce Materials Withheld Under the Presidential Communications Privilege. Four of the documents listed in Exhibit 1 were withheld under the presidential communications privilege, and the Court should review those documents in camera to determine the bona fides of Defendant s privilege assertions. The presidential communications privilege shields White House documents from routine disclosure in litigation in view of the need for confidentiality to ensure that presidential decisionmaking is of the highest caliber, informed by honest advice and full knowledge. In re Sealed Case, 121 F.3d 729, 750 (D.C. Cir. 1997). In view of that purpose, the privilege protects communications sent or solicited and received by the President or his immediate White House advisers when those advisers are preparing to give advice to the President. Judicial Watch, Inc. v. Department of Justice, 365 F.3d 1108, 1114 (D.C. Cir. 2004). The presidential communications privilege can be overcome by a showing that a document likely contains important evidence that is not available with due diligence elsewhere. In re Sealed Case, 121 F.3d at 754; Dairyland Power II, 79 Fed. Cl. at 661. It is apparent from other materials that Defendant has produced that 9 Defendant also asserts the deliberative process privilege over several of the documents listed in Exhibit 1 that are withheld under the bank examination privilege. To the extent that the Court concludes that these FHFA documents are subject to the deliberative process privilege at all, it should reject Defendant s deliberative process privilege claims because, as discussed above, supra Part II.F, the documents in question are not deliberative and because Plaintiffs have made the showing necessary to overcome that qualified privilege as well. 35

43 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 43 of 46. See, e.g., Ex. 32 at A257, UST (Aug. 17, 2012) ; Ex. 33 at A261, UST ; Ex. 34 at A264, UST ; Ex. 35, Transcript of Deposition of Jeff Foster at 112:15 113:9 (A268) (July 14, 2015); Ex. 36, Transcript of Deposition of Timothy Bowler at 152:16 153:13 (A271) (July 1, 2015). Because the documents listed in Exhibit 1 withheld under the presidential communications privilege may contain statements by senior Government officials on issues specifically pertinent to this case that are not publicly available, Dairyland Power II, 79 Fed. Cl. at 668, the Court should review those documents in camera and order their disclosure to Plaintiffs, pursuant to the Court s protective order, to the extent that they contain otherwise unavailable information relevant to this case. The Court should also direct Defendant to submit an appropriate affidavit from an authorized official formally invoking the privilege. See id. at 669. CONCLUSION For the foregoing reasons, this Court should: (1) to the extent that the documents in question are not covered by any other privilege, direct Defendant to produce deliberative process privilege documents listed in Exhibit 1 because Defendant has not properly asserted that privilege; (2) order that documents that are relevant to Defendant s purposes, intentions, and motivations for imposing the Net Worth Sweep are not covered by the deliberative process privilege or that Plaintiffs need for such documents is sufficient to overcome the qualified privilege; (3) order that documents shared with or produced by FHFA may not be withheld under the deliberative process privilege; 36

44 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 44 of 46 (4) order that documents that discuss the Net Worth Sweep and were created after its imposition are not predecisional and therefore may not be withheld under the deliberative process privilege, or that Plaintiffs need for those documents overcomes the qualified privilege; (5) order that financial data, models, and projections are not deliberative and therefore may not be withheld under the deliberative process privilege, or that Plaintiffs need for those documents overcomes the qualified privilege; (6) to the extent that the Court does not otherwise order all deliberative process privilege documents listed in Exhibit 1 produced, review those documents in camera and determine whether they are deliberative and predecisional and whether Plaintiffs need for them overcomes the qualified privilege; (7) order that FHFA s communications with the Companies are not protected by the bank examination privilege, especially where those communications occurred while the Companies were under FHFA s control during conservatorship; (8) to the extent that it rules that FHFA may assert the bank examination privilege over documents listed in Exhibit 1, review those documents in camera to determine whether Defendant has properly asserted the privilege and whether Plaintiffs need for the documents in question overcomes the privilege; (9) review in camera the documents listed in Exhibit 1 as withheld under the presidential communications privilege and determine whether Defendant has properly asserted the privilege; and (10) order Defendant to re-assess all of its privilege claims in light of the Court s decision and to produce all documents that are not genuinely privileged. 37

45 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 45 of 46 Date: November 23, 2015 Respectfully submitted, Of counsel: David H. Thompson Vincent J. Colatriano Howard C. Nielson, Jr. Peter A. Patterson Brian W. Barnes COOPER & KIRK, PLLC 1523 New Hampshire Avenue, N.W. Washington, D.C (202) (202) (fax) Counsel for Plaintiffs s/ Charles J. Cooper Charles J. Cooper Counsel of Record COOPER & KIRK, PLLC 1523 New Hampshire Avenue, N.W. Washington, D.C (202) (202) (fax) 38

46 Case 1:13-cv MMS Document 272 Filed 12/07/15 Page 46 of 46 CERTIFICATE OF SERVICE I hereby certify that a true and accurate copy of the foregoing was served upon all counsel of record on this 23rd day of November, 2015, via the Court s Electronic Case Filing system. s/ Charles J. Cooper Charles J. Cooper 39

47 Case 1:13-cv MMS Document Filed 12/07/15 Page 1 of 68 APPENDIX Volume 1

48 Case 1:13-cv MMS Document Filed 12/07/15 Page 2 of 68 Exhibit 1: Exhibit 2: Exhibit 3: Exhibit 4: Exhibit 5: Exhibit 6: APPENDIX VOLUME 1 TABLE OF CONTENTS Excerpts from Nov. 19, 2015 Treasury and FHFA Privilege Logs... A001 Letter from Elizabeth Hosford to Brian Barnes (Nov. 13, 2015)... A012 Letter from Vincent Colatriano to Gregg Schwind (Feb. 5, 2015)... A027 Letter from Gregg Schwind to Vincent Colatriano (July 10, 2015)... A033 from Brian Barnes to Elizabeth Hosford and Gregg Schwind (July 17, :59 PM EST)... A035 Letter from Elizabeth Hosford to Vincent Colatriano (July 28, 2015)... A037 Exhibit 7: from Vincent Colatriano to Elizabeth Hosford (Aug. 12, :53 PM EST)... A040 Exhibit 8: from Elizabeth Hosford to Vincent Colatriano (Aug. 17, :29 PM EST)... A048 Exhibit 9: Exhibit 10: Exhibit 11: Exhibit 12: Exhibit 13: Exhibit 14: Transcript of Deposition of Susan McFarland (July 15, 2015)... A055 Letter from Elizabeth Hosford to Vincent Colatriano (Sept. 1, 2015)... A068 UST A075 UST A079 UST A089 UST A093

49 Case 1:13-cv MMS Document Filed 12/07/15 Page 3 of 68 EXHIBIT 1 A001

50 Case 1:13-cv MMS Document Filed 12/07/15 Page 4 of 68 Excerpts from November 19, 2015 Treasury Privilege Log Bates Number From To CC UST Foster, Jeff <jeff.foster@treasury.gov> Bowler, Timothy <timothy.bowler@treasury.gov>; "Stegman, Michael" <michael.stegman@treasury.gov> Doc Family Date Privileges Description Draft presentation prepared by Treasury staff containing predecisional deliberations related to PSPA amendment 6/10/2012 DPP considerations. UST Foster, Jeff <jeff.foster@treasury.gov> Bowler, Timothy <timothy.bowler@treasury.gov>; "Mlynarczyk, Beth" <beth.mlynarczyk@treasury.gov>; "Chepenik, Adam" <adam.chepenik@treasury.gov>; "Franchot, NicholasDisabled" <nicholas.franchot@treasury.gov>; "Stegman, Michael" <michael.stegman@treasury.gov> 3/5/2012 DPP Draft policy document prepared by Treasury staff containing predecisional deliberations regarding proposed PSPA UST Valverde, Sam <sam.valverde@treasury.gov>; "Adeyemo, Adewale (Wally)" <adewale.adeyemo@treasury.gov>; "Massad, Timothy" <timothy.massad@treasury.gov>; "Stegman, Michael" Miller, Mary <michael.stegman@treasury.gov>; "Bowler, Timothy" <mary.miller@treasury.gov <timothy.bowler@treasury.gov>; > "Deese, Brian C." <brian_c._deese@who.eop.gov> Woolf, AndrewDisabled <andrew.woolf@treasury.gov > 7/20/2012 DPP Draft document prepared by Treasury staff containing predecisional deliberations related to potential modification of PSPAs. UST ExecSecProcessUnit <execsecprocessunit@trea sury.gov> TFG75 <nauset75@treasury.gov> ExecSecProcessUnit <execsecprocessunit@treasur y.gov>, ExecSecStaff <execsecstaff@do.treas.gov> 6/1/2012 DPP Draft document containing predecisional deliberations concerning potential modification of the PSPAs. UST Goldblatt, Alan <alan.goldblatt@treasury.g Chepenik, Adam <adam.chepenik@treasury.gov>; "Foster, ov> JeffDisabled" <jeff.foster@treasury.gov> 6/13/2012 DPP Draft analysis reflecting predecisional deliberations concerning GSE financial projections. A002

51 Case 1:13-cv MMS Document Filed 12/07/15 Page 5 of 68 Excerpts from November 19, 2015 Treasury Privilege Log Bates Number From To CC Doc Family Date Privileges Description UST Chepenik, Adam <adam.chepenik@treasury.gov> Bowler, Timothy <timothy.bowler@treasury.gov>, "Foster, JeffDisabled" <jeff.foster@treasury.gov>, "Goldblatt, Alan" <alan.goldblatt@treasury.gov> 6/6/2012 DPP Draft presentation for OMB containing predecisional deliberations concerning Treasury proposals for modifying the terms of the PSPAs. UST Chepenik, Adam <adam.chepenik@treasury. gov> Miller, Mary <mary.miller@treasury.gov> Hester, Barrett (Bret)Disabled <barrett.hester@treasury.gov >; "Bowler, Timothy" <timothy.bowler@treasury.g ov>; "Foster, JeffDisabled" <jeff.foster@treasury.gov>; "Johnson, AlfredDisabled" <alfred.johnson@treasury.go v> 1/10/2012 DPP Draft document prepared by Treasury staff containing predecisional deliberations regarding GSE budget estimates. UST Chepenik, Adam Bowler, Timothy <timothy.bowler@treasury.gov>; "Foster, <adam.chepenik@treasury. JeffDisabled" <jeff.foster@treasury.gov>; gov> "Mlynarczyk, Beth" <beth.mlynarczyk@treasury.gov> 2/26/2012 DPP Predecisional deliberative analysis of GSE financial projections prepared by Treasury staff. UST Chepenik, Adam Bowler, Timothy <timothy.bowler@treasury.gov>; "Foster, <adam.chepenik@treasury. JeffDisabled" <jeff.foster@treasury.gov>; gov> "Mlynarczyk, Beth" <beth.mlynarczyk@treasury.gov> 2/26/2012 DPP Predecisional deliberative analysis of GSE financial projections prepared by Treasury staff. UST Goldblatt, Alan <alan.goldblatt@treasury.g Chepenik, Adam <adam.chepenik@treasury.gov>; "Foster, ov> JeffDisabled" <jeff.foster@treasury.gov> 7/5/2012 DPP Predecisional, deliberative,draft analysis of GSE financial projections prepared by Treasury staff. A003

52 Case 1:13-cv MMS Document Filed 12/07/15 Page 6 of 68 Excerpts from November 19, 2015 Treasury Privilege Log Bates Number From To CC UST Goldblatt, Alan <alan.goldblatt@treasury.g ov> Bowler, Timothy <timothy.bowler@treasury.gov> 7/3/2012 DPP Doc Family Date Privileges Description Draft presentation prepared by Treasury staff containing predecisional analysis and information related to financial forecasts for Fannie Mae. UST Bowler, Timothy <"/o=ustreasury/ou=excha nge administrative Graves, Donet (Don) <donet.graves@treasury.gov>, "Caldwell, Phyllis" group(fydibohf23spdlt)/cn= <phyllis.caldwell@treasury.gov>, recipients/cn=bowlert"> "Foster, Jeff" <jeff.foster@treasury.gov> 9/6/2011 DPP Draft memorandum prepared by Treasury staff containing predecisional deliberations regarding housing policy reform, including the future of the GSEs. UST Miller, Sarah <sarah.miller@treasury.gov Mlynarczyk, Beth <beth.mlynarczyk@treasury.gov>, "Stegman, > Michael"<michael.stegman@treasury.gov> 7/30/2012 DPP Draft policy paper prepared by Treasury staff containing predecisional deliberations regarding housing finance reform. UST Foster, Jeff <"/o=ustreasury/ou=excha nge administrative group(fydibohf23spdlt)/cn= Valverde, Sam <sam.valverde@treasury.gov>; "Fikre, Million" recipients/cn=fosterj"> <million.fikre@treasury.gov> 1/31/2012 DPP Draft memorandum for Secretary containing predecisional deliberations related to GSE restructuring. UST Foster, Jeff <"/o=ustreasury/ou=excha nge administrative group(fydibohf23spdlt)/cn= Valverde, Sam <sam.valverde@treasury.gov>; "Fikre, Million" recipients/cn=fosterj"> <million.fikre@treasury.gov> 1/31/2012 DPP Draft memorandum for Secretary containing predecisional deliberations related to mortgage finance market reform proposals. UST Foster, Jeff <"/o=ustreasury/ou=excha nge administrative group(fydibohf23spdlt)/cn= recipients/cn=fosterj"> Foster, Jeff 6/5/2012 DPP Draft policy paper containing predecisional deliberations concerning housing finance reform. UST Bowler, Timothy <"/o=ustreasury/ou=excha nge administrative group(fydibohf23spdlt)/cn= Mlynarczyk, Beth <beth.mlynarczyk@treasury.gov>; "Stegman, recipients/cn=bowlert"> Michael" <michael.stegman@treasury.gov> 7/27/2012 DPP Draft memorandum prepared by Treasury staff containing predecisional deliberations related to various FHFA/GSE housing finance initiatives. A004

53 Case 1:13-cv MMS Document Filed 12/07/15 Page 7 of 68 Excerpts from November 19, 2015 Treasury Privilege Log Bates Number From To CC UST UST Stegman, Michael Stegman, Michael; Bowler, Timothy; Parrott, Jim; Deese, Brian C.; Miller, Mary; Valverde, Sam [sam.valverde@treasury.go v] Miller, Mary <mary.miller@treasury.gov> Stegman, Michael; Bowler, Timothy; Parrott, Jim; Deese, Brian C.; Miller, Mary; Eberly, Janice [janice.eberly@treasury.gov]; ExecSecStaff [execsecstaff@do.treas.gov] Stegman, Michael <michael.stegman@treasury. gov> Patterson, Mark [mark.patterson@treasury.go v]; Wolin, Neal; LeCompte, Jenni[jenni.lecompte@treasu ry.gov]; Parrott, Jim;Miller, Mary; Stegman, Michael Doc Family Date Privileges Description 2/4/2012 DPP 5/2/2012 DPP; PCP Draft memorandum containing predecisional deliberations related to housing policy and housing finance reform. Memorandum reflecting confidential communication from senior White House advisors to the President regarding housing policy ideas and initiatives. UST Foster, Jeff <"/o=ustreasury/ou=excha nge administrative group(fydibohf23spdlt)/cn= recipients/cn=fosterj"> Foster, Jeff 5/21/2012 DPP Draft policy document prepared by Treasury staff containing predecisional deliberations regarding housing finance reform. UST Hester, Barrett (Bret) <barrett.hester@treasury.g ov> Miller, Mary <mary.miller@treasury.gov> Lee, Sandra <sandra.lee@treasury.gov>, "Johnson, AlfredDisabled" <alfred.johnson@treasury.go v> 2/21/2012 DPP Draft memorandum for Secretary containing predecisional deliberations related to policy implications of proposed housing finance legislation. UST Stegman, Michael Mlynarczyk, Beth <beth.mlynarczyk@treasury.gov> Stegman, Michael <michael.stegman@treasury. gov> 5/26/2012 DPP Draft speech containing predecisional deliberations regarding housing policies. UST UST Chepenik, Adam <adam.chepenik@treasury. gov> Foster, JeffDisabled <jeff.foster@treasury.gov> 1/6/2012 DPP Chepenik, Adam <adam.chepenik@treasury. gov> Foster, JeffDisabled <jeff.foster@treasury.gov> 1/6/2012 DPP Predecisional deliberative analysis of GSE financial projections prepared by Treasury consultant. Predecisional deliberative analysis of GSE financial projections prepared by Treasury consultant. UST Chepenik, Adam <adam.chepenik@treasury. gov> Foster, JeffDisabled <jeff.foster@treasury.gov> 1/6/2012 DPP A005 Predecisional deliberative analysis of GSE financial projections prepared by Treasury consultant.

54 Case 1:13-cv MMS Document Filed 12/07/15 Page 8 of 68 Excerpts from November 19, 2015 Treasury Privilege Log Bates Number From To CC Doc Family Date Privileges Description UST UST Chepenik, Adam <adam.chepenik@treasury. gov> Foster, JeffDisabled <jeff.foster@treasury.gov> 1/6/2012 DPP Eberhardt, Anne <anne.eberhardt@us.gt.co m> Foster, JeffDisabled <jeff.foster@treasury.gov> 3/12/2012 DPP Predecisional deliberative analysis of GSE financial projections prepared by Treasury consultant. Draft document prepared for Treasury by consultant containing predecisional deliberations concerning GSE financial projections. UST Eberhardt, Anne <anne.eberhardt@us.gt.co m> Banks, Carole <carole.banks@treasury.gov>; "Mickey, Shawn" <shawn.mickey@treasury.gov>; "Taylor, Kawan" <kawan.taylor@treasury.gov>; "Foster, JeffDisabled" <jeff.foster@treasury.gov>; "Fitzgerald, Michael P." <fitzgeraldm@oig.treas.gov>; "Rominiecki, Ryan" <rrominiecki@kpmg.com> Short, John <john.short@us.gt.com>;"duf endach, David"<david.dufendach@us. gt.com>; "Burchett, Justin" <justin.burchett@us.gt.com> 6/29/2012 DPP Document prepared by Treasury consultant reflecting predecisional deliberations concerning financial conditions of the GSEs. UST Rominiecki, Ryan R <rrominiecki@kpmg.com> Eberhardt, Anne <anne.eberhardt@us.gt.com>; "Banks, Carole" <carole.banks@treasury.gov>; "Taylor, Kawan" <kawan.taylor@treasury.gov>; "Mickey, Shawn" <shawn.mickey@treasury.gov>; "Foster, JeffDisabled" <jeff.foster@treasury.gov>; "Mlynarczyk, Beth" <beth.mlynarczyk@treasury.gov>; "Grover, Joel A" <groverj@oig.treas.gov>; "Bankole, Ade O." <bankolea@oig.treas.gov>; "Fitzgerald, Michael P." <fitzgeraldm@oig.treas.gov>; "Cumba, Rafael J." <cumbar@oig.treas.gov>; "Faber, Bob" <bob.faber@treasury.gov>; "Wilson, Brad" <brad.wilson@us.gt.com>; "Dufendach, David" <david.dufendach@us.gt.com>; "Burchett, Justin" <justin.burchett@us.gt.com> Tchamourliyski, Yuriy M<ytchamourliyski@kpmg.co m>; "Lee, Shana H" <shlee@kpmg.com> 11/1/2011 DPP Draft memorandum prepared containing predecisional deliberative analysis of financial projections for Fannie Mae. UST Stegman, Michael^ 6/18/2012 DPP; PCP Memorandum reflecting confidential communication from senior White House advisors to the President regarding housing policy ideas and initiatives. A006

55 Case 1:13-cv MMS Document Filed 12/07/15 Page 9 of 68 Excerpts from November 19, 2015 Treasury Privilege Log Bates Number From To CC Doc Family Date Privileges Description UST UST Parrott, Jim; Foster, Jeff Foster, Jeff; Parrott, Jim 7/29/2011 DPP; PCP Geithner, Timothy; Wolin, Neal; Stegman, Michael; Gandhi, Sima Sperling, Gene [gene_b_sperling@who.eo p.gov]; Geithner, Timothy; Wolin, Neal [sima.gandhi@treasury.gov]; Gerety, Amias [amias.gerety@treasury.gov]; Hester, Barrett (Bret) [barrett.hester@treasury.gov]; Miller, Mary; Gibson, Campbell [campbell.gibson@treasury.gov]; Amir Mokri, Cyrus [neal.wolin@treasury.gov]; [cyrus.amir mokri@treasury.gov]; Miller, Mary Chisolm, Shirley [shirley.chisolm@treasury.gov] Deese, Brian C. 3/12/2012 Red.; PCP s reflecting the exchange of information, views, and advice between Treasury officials and White House staff with broad and significant responsibility for investigating and formulating advice for consideration and direction by the President regarding housing finance issues. reflecting the exchange of information, views, and advice between Treasury officials and senior White House advisors for consideration and direction by the President regarding housing finance issues. UST ExecSecProcessUnit <execsecprocessunit@trea sury.gov> ExecSecStaff <execsecstaff@do.treas.gov> ExecSecProcessUnit <execsecprocessunit@treasur y.gov> 4/16/2012 DPP Briefing memoranda and material prepared by Treasury staff for Secretary containing predecisional deliberations and recommendations related to various policy matters. UST Parrott, Jim <james_m_parrott@who.e op.gov> Bowler, Timothy <timothy.bowler@treasury.gov> 8/18/2012 DPP communications between Treasury and White House staff containing predecisional deliberations related to the terms of the PSPAs. UST Bowler, Timothy <"/o=ustreasury/ou=excha nge administrative group(fydibohf23spdlt)/cn= recipients/cn=bowlert"> Parrott, Jim <james_m_parrott@who.eop.gov> 8/18/2012 DPP communications containing predecisional deliberations related to the budget and the amended PSPAs. UST Foster, Jeff <"/o=ustreasury/ou=excha nge administrative group(fydibohf23spdlt)/cn= recipients/cn=fosterj"> Stegman, Michael <michael.stegman@treasury.gov> 6/7/2012 DPP A007 Draft document containing predecisional deliberations concerning potential modifications to PSPAs.

56 Case 1:13-cv MMS Document Filed 12/07/15 Page 10 of 68 Excerpts from November 19, 2015 Treasury Privilege Log Bates Number From To CC Doc Family Date Privileges Description UST UST UST UST Eberhardt, Anne m> Foster, JeffDisabled 12/10/2011 DPP Eberhardt, Anne m> Foster, JeffDisabled 12/10/2011 DPP Gorham, Tynia "Donnelly, Michael" "Hopkins, JoshuaDisabled" "Florman, Carole" "Reger, Mark" "Carrington, Wanda" "Gerety, Amias" "Rourke, Daniel" "Tepperman, Jason" "Quittman, Louisa" "Roberts, Benson" "Graves, Donet (Don)" "Rosen, Katheryn" "Grom, John (J.D.)Disabled" "Auer, LanceDisabled" "Courtney, JudithDisabled" "Polan, TheodoreDisabled" "Bowler, Timothy" "Kash, Elaine" "Koide, Melissa" "Graves, Leslie" "Stout, Jeffrey" "Hester, Barrett Wrennall Montes, Sally (Bret)Disabled" "Franco, Jamie" asury.gov> "Roberts, David" Lee, Sandra "Woolf, AndrewDisabled" >; "Cabot, Chloe" "Wrennall Montes, Sarah (Sally)" <sally.wrennall 8/20/2012 DPP Eberhardt, Anne m> Foster, JeffDisabled 12/10/2011 DPP A008 Predecisional financial analysis prepared by Treasury consultant reflecting Treasury deliberations regarding GSEs. Predecisional financial analysis prepared by Treasury consultant reflecting Treasury deliberations regarding GSEs. Draft information memorandum for Secretary reflecting predecisional deliberations regarding potential amendments to the PSPAs. Predecisional financial analysisprepared by Treasury consultant reflecting Treasury deliberations regarding GSEs.

57 Case 1:13-cv MMS Document Filed 12/07/15 Page 11 of 68 Excerpts from November 19, 2015 Treasury Privilege Log Bates Number From To CC Doc Family Date Privileges Description UST UST UST UST Eberhardt, Anne m> Foster, JeffDisabled 12/10/2011 DPP Eberhardt, Anne m> Foster, JeffDisabled 12/10/2011 DPP Eberhardt, Anne m> Foster, JeffDisabled 12/10/2011 DPP Foster, Jeff <"/o=ustreasury/ou=excha nge administrative group(fydibohf23spdlt)/cn= recipients/cn=fosterj"> Chepenik, Adam 12/13/2011 DPP Predecisional financial analysis prepared by Treasury consultant reflecting Treasury deliberations regarding GSEs. Predecisional financial analysis prepared by Treasury consultant reflecting Treasury deliberations regarding GSEs. Predecisional financial analysis prepared by Treasury consultant reflecting Treasury deliberations regarding GSEs. Predecisional deliberative analysis of GSE financial projections prepared by Treasury consultant. UST UST Foster, Jeff <"/o=ustreasury/ou=excha nge administrative group(fydibohf23spdlt)/cn= recipients/cn=fosterj"> Chepenik, Adam 12/13/2011 DPP Foster, Jeff <"/o=ustreasury/ou=excha nge administrative group(fydibohf23spdlt)/cn= recipients/cn=fosterj"> Chepenik, Adam 12/13/2011 DPP Predecisional deliberative analysis of GSE financial projections prepared by Treasury consultant. Predecisional deliberative analysis of GSE financial projections prepared by Treasury consultant. A009

58 Case 1:13-cv MMS Document Filed 12/07/15 Page 12 of 68 Excerpts from November 19, 2015 FHFA Privilege Log Bates Number Date From To CC Additional Recipients Description Privilege Assertion FHFA /16/2011 Tagoe, Naa Awaa Williams, John FHFA projection of remaining GSE Treasury funding commitment under FHFA stress scenarios containing pre decisional deliberations Deliberative Process; Bank Examination FHFA /28/2012 Williams, John Tagoe, Naa Awaa Calhoun, Peter FHFA Risk Assessment Memorandum prepared in connection with FHFA's regulatory supervision regarding Fannie Mae's 4Q earnings Bank Examination FHFA /28/2012 Williams, John Tagoe, Naa Awaa Calhoun, Peter FHFA Risk Assessment Memorandum prepared in connection with FHFA's regulatory supervision regarding the solvency of Fannie Mae Bank Examination FHFA /28/2012 Williams, John Tagoe, Naa Awaa Calhoun, Peter FHFA Risk Assessment Memorandum prepared in connection with FHFA's regulatory supervision regarding Freddie Mac's 4Q earnings Bank Examination FHFA /28/2012 Williams, John Tagoe, Naa Awaa Calhoun, Peter FHFA Risk Assessment Memorandum prepared in connection with FHFA's regulatory supervision regarding the solvency of Freddie Mac Bank Examination FHFA /29/2008 DeLeo, Wanda Lockhart, James DeMarco, Edward Mullin, Stefanie; Dickerson, Christopher; Brereton, Peter; Russell, Corinne; Pollard, Alfred*; Lakroune, Amy RM: Internal communication among senior FHFA staff containing predecisional deliberations regarding response to a media story on deferred tax assets of the GSEs and management delegations by the conservator Deliberative Process FHFA /16/2008 Bjarnason, Paul Satriano, Nicholas FHFA presentation containing pre decisional deliberations in relation to its regulatory supervision regarding accounting for deferred tax assets Deliberative Process; Bank Examination A010

59 Case 1:13-cv MMS Document Filed 12/07/15 Page 13 of 68 Excerpts from November 19, 2015 FHFA Privilege Log Bates Number Date From To CC Additional Recipients Description Privilege Assertion FHFA FHFA /7/2008 9/7/2008 Dickerson, Christopher Dickerson, Christopher Pearl, David Pearl, David Document prepared by Black Rock to support pre decisional deliberations and provided to FHFA in relation to its regulatory supervision regarding analysis of Fannie Mae's loss and Deliberative capital Process; Bank projections Examination Document prepared by Black Rock to support pre decisional deliberations and provided to FHFA in relation to its regulatory supervision regarding analysis of Freddie Mac's loss and Deliberative capital Process; Bank projections Examination FHFA /7/2008 Dickerson, Christopher Pearl, David Presentation by Black Rock to support pre decisional deliberations and provided to FHFA in relation to its regulatory supervision regarding analysis of GSE loss and capital projections Deliberative Process; Bank Examination FHFA /27/2008 Eldarrat, Christine Dickerson,Christopher; Tagoe, Naa Awaa; Smith, Scott; Spohn, Jeffrey; Deleo, Wanda; Clark, Tim, Crisp, Stanley Eldarrat, Christine Presentation prepared by consultant Blackrock containing pre decisional deliberations regarding analysis of Freddie Mac projected losses and implications for capital Deliberative Process FHFA /14/2011 Williams, John Eberhardt, Anne Tagoe, Naa Awaa Presentation of FHFA Forecast Scenarios prepared by Fannie Mae at FHFA's request Deliberative Process; Bank Examination A011

60 Case 1:13-cv MMS Document Filed 12/07/15 Page 14 of 68 EXHIBIT 2 A012

61 Case 1:13-cv MMS Document Filed 12/07/15 Page 15 of 68 U.S. Department of Justice Civil Division REK:KMD:EHosford Telephone: (202) DJ No Washington, DC November 13, 2015 By and U.S. Mail Brian W. Barnes Cooper & Kirk, PLLC 1523 New Hampshire Ave. NW Washington, D.C (202) Re: Fairholme Funds, Inc. et al., v. United States, No C (Fed. Cl.) Dear Mr. Barnes, In an effort to meet our joint obligation to confer in good faith about discovery disputes, we write to address issues plaintiffs raised regarding certain documents on our privilege log, which you raised in your recent correspondence. 1 Although we have reconsidered our assertions of privilege for a small number of documents (that we intend to produce in full or redacted form), we believe that, for the vast majority of the documents you have identified, our privilege justifications satisfy the requirements of RCFC 26 and the privilege assertion is proper. We will first respond to the legal arguments raised in the letter from Vince Colatriano to Gregg Schwind dated February 5, 2015 (attached to your dated October 21, 2015), and addressed in the subsequent exchange between Messrs. Schwind and Colatriano on March 20, 23, and 27, We will then address your challenges to the individual documents identified in the chart attached to your October 29, We hope that this comprehensive response will resolve the issues you raised regarding the Government s assertions of privilege in this action. I. Legal Positions A. Declarations In his February 5, 2015 letter, Mr. Colatriano stated your position that the Government may not assert either the deliberative process or presidential communication privileges without an affidavit from the agency official attesting that the documents have been properly withheld. The Government, however, is not required to produce declarations in support of its invocation of the deliberative process or presidential communications privileges unless and until a motion to compel is filed with regard to specific documents over which we have asserted the privilege. 1 This correspondence includes your s dated October 21, 27, and 29, 2015, and the accompanying attachments. A013

62 Case 1:13-cv MMS Document Filed 12/07/15 Page 16 of See, e.g., United States v. Reynolds, 345 U.S. 1, (1953) (reversing and remanding trial court s decision compelling the production of documents subject to governmental privilege when formal claim of privilege was not submitted until after initial ruling on motion to compel); Dairyland Power Co-op. v. United States, 79 Fed. Cl. 659, 662 (2007) ( [T]he White House need not formally invoke the presidential communications privilege until the party making the discovery request has shown a heightened need for the information sought. ); see also In re Sealed Case, 121 F.3d 729, 741 (D.C. Cir. 1997) (Government did not have an obligation to formally invoke its privileges in advance of the motion to compel, because it satisfied the requirements of the Federal Rules of Civil Procedure when it timely objected to the subpoena for documents and stated the claim of privilege under which it was objecting). If plaintiffs ultimately file a motion to compel challenging the applicability of these privileges to specific documents, we will provide declarations in support of our privilege assertions with respect to those documents. B. FHFA s Assertion Of Bank Examination And Deliberative Process Privileges We disagree with your contentions that FHFA may not assert the bank examination privilege generally with respect to the GSEs, or, at a minimum, with respect to any documents created during the conservatorship. We also disagree with your contention that FHFA may not assert the deliberative process privilege at all given the Government s position that the FHFA is not the United States when acting as conservator. FHFA may assert the bank examination and deliberative process privileges with respect to the GSEs if the court determines that, contrary to our position, FHFA is the United States when acting as conservator. As we indicated in our March 27, , we believe the question of the availability to FHFA of these privileges during the conservatorship goes to the heart of the jurisdictional argument in our motion to dismiss: whether FHFA, acting as conservator, is the United States. Our position has not changed. If you are suggesting that the court should now decide the legal issue raised in our motion to dismiss before jurisdictional discovery is concluded, we would agree; indeed, it has been our position all along that jurisdictional discovery is unnecessary and inappropriate here. If, however, Fairholme is willing to seek a ruling on this issue before discovery is concluded, notwithstanding its prior assertion that the issue could not be decided absent discovery, then we would also insist that we jointly ask the court to decide the other issues in our motion. We do not believe this issue to be severable from the final question of jurisdiction. C. Subjective Motivation We disagree with your contention that the Government may not assert the deliberative process and bank examination privileges when the Government s subjective motivations are at issue. First, in the Federal Circuit, the presence of a claim turning on the subjective motivation of the Government is not a basis for overcoming the deliberative process privilege. First Heights Bank, FSB v. United States, 46 Fed. Cl. 312, (2000) (refusing to adopt D.C. Circuit rule, A014

63 Case 1:13-cv MMS Document Filed 12/07/15 Page 17 of as stated in In re Subpoenas Duces Tecum, 145 F.3d 1422 (D.C. Cir. 1998), barring assertion of deliberative process privilege in any case where the Government s intent is potentially relevant because it was inconsistent with Federal Circuit precedent). Second, even if that were the law in this circuit, neither the jurisdictional questions currently in dispute nor the merits of plaintiffs takings claims turn on the Government s motivation behind its actions the only matters at issue are what, in fact, the Government did. See Air Pegasus of D.C., Inc. v. United States, 424 F.3d 1206, (Fed. Cir. 2005) (taking claims require two-part showing that plaintiff must have had a valid property interest and governmental action at issue amounted to a compensable taking of that property interest ) (emphasis added) (quotation marks and citation omitted). D. Post-Decisional Deliberations We disagree with your contention that the Government may never assert the deliberative process privilege over documents generated after the decision at issue. As we stated in our March 27, , the Government may assert the deliberative process privilege with respect to communications that post-date a decision if the communications recount Government employees views of the proposed decision before the decision was adopted. Ford Motor Co. v. United States, 94 Fed. Cl. 211, 223 (2010) ( [D]ocuments created after a decision which recount pre-decisional deliberations are covered by the [deliberative process] privilege ) (citing Citizens for Responsibility and Ethics in Washington v. Dep t of Justice, 658 F. Supp. 2d 217, (D.D.C. 2009)). We have withheld documents falling into this category pursuant to this rule. Furthermore, certain documents over which we asserted the privilege after August 17, 2012, relate to deliberations and decisions other than the adoption of the Third Amendment. If you contend the deliberative process privilege cannot be asserted in either of these scenarios, then those discrete legal issues are appropriate for briefing and may be undertaken without court review of documents. To the extent you have raised this objection with regard to specific documents, we provide additional information in part II below. E. Factual Information As we stated in our March 27, , we generally agree that the bank examination and deliberative process privileges may not be asserted over purely factual documents or the reasonably divisible factual portions of otherwise privileged documents. Our privilege assertions are consistent with this premise, including with respect to the documents you identified in your chart sent on October 29, We disagree with your position that financial projection models are factual documents not subject to the deliberative process privilege. Other courts have recognized that the use of financial projections as part of an agency s decision-making process is properly protected by the deliberative process privilege. See, e.g., Am. Petroleum Tankers Parent, LLC v. United States, 952 F. Supp. 2d 252, 269 (D.D.C. 2013) ( [T]he applicability of the privilege does not turn on whether the material is purely factual in nature or whether it is already in the public domain, but rather on whether the selection or organization of facts is part of an agency s deliberative process. ) (quoting Ancient Coin Collectors Guild v. U.S. Dep t of State, 641 F.3d 504, 513 A015

64 Case 1:13-cv MMS Document Filed 12/07/15 Page 18 of (D.C. Cir. 2011)); id. at (finding that slides depicting financial projections of Stress and Expected case[s], on its face, reflected the Government s culling and performing its own analysis as part of the deliberative process and falls squarely within the privilege afforded to documents reflecting an agency s exercise of discretion and judgment calls ) (quoting Ancient Coin Collectors, 641 F.3d at 513). If it is your position that the deliberative process privilege cannot be asserted over financial projection models, then that discrete legal issue is appropriate for briefing and may be undertaken without court review of documents. F. Attorney-Client Privilege We disagree with your contention that there has been subject matter waiver of the attorney-client privilege with respect to Treasury s communications with DOJ prior to the Third Amendment. As an initial matter, we note that you abandoned your request for documents reflecting communications between Treasury and DOJ relating to the Net Worth Sweep, as indicated in the letter from David Thompson to Gregg Schwind dated October 6, Accordingly, we marked two of the documents you have identified UST and UST as not responsive. Regarding the substance of your waiver arguments, we see no basis for a broad waiver of attorney-client communications between Treasury and DOJ based on either of the documents you have identified. See Fed. R. Evid. 502(a) (the disclosure of a privileged attorney-client communication may only waive privilege over an undisclosed communication or information if (1) the waiver is intentional; (2) the disclosed and undisclosed communications or information concern the same subject matter; and (3) they ought in fairness to be considered together ). Contrary to your assertion in your October 21, , the inclusion of the June 13, 2012 presentation to the SEC and the August 15, 2012 action memorandum in the administrative record in the district court action did not constitute a waiver of the attorney-client privilege with respect to the subject matter of DOJ s advice to Treasury. We generally agree with your statement in the February 5, 2015 letter that the attorneyclient privilege only protects confidential communications sent to or received from an attorney for the purpose of obtaining legal advice. We further agree that the privilege generally does not apply when a lawyer is asked for or provides advice about policy or other non-legal matters. If there are documents over which you contend we have improperly asserted this privilege on these grounds, please identify those and we will review them. 2 2 We note that you have challenged one document UST on the basis that the privilege log does not indicate that this document is an attorney-client communication. While the privilege log identifies this document as an attachment to an from Under Secretary of Domestic Finance Mary Miller to an administrative assistant, the cover , UST , which has been produced, shows Ms. Miller was forwarding an containing attachments A016

65 Case 1:13-cv MMS Document Filed 12/07/15 Page 19 of If you maintain your position that the Government has waived attorney-client privilege with respect to all communications with DOJ concerning any part of the Third Amendment, notwithstanding your abandonment of your request for DOJ documents more than a year ago, we believe that discrete legal issue is ripe for briefing and does not require the court to consider any undisclosed documents subject to that purported waiver unless and until the court finds a waiver actually occurred. We will not individually address the documents you have identified as subject to a waiver of attorney-client privilege at this time. G. Need You have provided insufficient information upon which to evaluate the plaintiffs assertion that their need would overcome the Government s assertion of the deliberative process, bank examination, and presidential communications privileges. See, e.g., Abramson v. United States, 39 Fed. Cl. 290, (1997) ( [A] movant may still overcome the privilege by demonstrating a compelling need to discover the privileged information. Furthermore, once the privilege has been invoked, a court should hesitate to request documents or information for inspection in camera until such time that the moving party has made this difficult showing. ). Because your to us has not articulated the basis underlying the need for any of the specifically identified documents, we cannot respond. In addition, several of the documents for which you assert that your need overcomes a qualified privilege are highly iterative documents that were frequently updated, modified, and, in many cases, never finalized. The sheer number of variations of similar documents underscore that these versions are both deliberative and predecisional. We believe that plaintiffs purported need for any particular version of these highly iterative documents should be evaluated within the context of numerous similar, non-identical copies. Moreover, because selective review of such iterative documents could be misleading to the court, at a minimum, the court should be made aware of the existence of other variations when evaluating plaintiffs asserted need for the version challenged, and plaintiffs should provide the court with an opportunity to review those other versions simultaneously in order to resolve the parties privilege disputes in the most efficient manner. It will be our position that the court s resolution of a privilege challenge to a single version of a highly iterative document will not apply to other similar versions where plaintiffs did not specifically identify and provide the court an opportunity to review the other versions. To promote efficiency, in addressing your challenges to specific documents in part II below, we have, where applicable, identified the similar versions of highly iterative documents. shared with agency counsel and reflecting legal advice. We will not withdraw our assertion of attorney-client privilege over this document. We also note that one of the documents you contend is subject to a waiver of attorneyclient privilege UST has not been withheld pursuant to that privilege. A017

66 Case 1:13-cv MMS Document Filed 12/07/15 Page 20 of II. Document Challenges We have reviewed the documents you have identified in your s dated October 21, 27, and 29, As mentioned above, we have reconsidered our assertion of privilege over a small number of documents. We maintain, however, that our assertions of privilege over the vast majority of those documents you have identified were proper. A. Documents For Which We Have Reconsidered Our Privilege Assertion UST is a memorandum summarizing proposed housing legislation. We have reconsidered our assertion of the deliberative process privilege and are withdrawing that assertion. We will produce this memorandum to you and remove the entry from our privilege log. UST and UST are agendas or timelines prepared for Treasury by Grant Thornton. We have reconsidered our assertion of the deliberative process privilege and are withdrawing that assertion. We will produce these documents to you and remove the entries from our privilege log. We will also produce the following, similar documents and remove the relevant entries from our privilege log: UST ; UST ; UST ; UST ; UST ; UST ; and UST UST is a memorandum to Under Secretary for Domestic Finance Mary Miller concerning an upcoming meeting with Freddie Mac management. We believe the assertion of the deliberative process privilege is justified. However, we withdraw our privilege assertion over this version, the final copy of the memorandum, and we will remove the entry from our privilege log, because the substance concerns communications between Treasury and the GSEs. We maintain our assertion of privilege over draft versions of the same memorandum, including: UST ; UST ; UST ; UST ; UST ; UST ; UST ; and UST UST is an internal chart containing predecisional deliberations concerning potential housing finance reforms. This chart was inadvertently marked as protected by the attorney-client privilege during the review process. We are withdrawing our assertion of the attorney-client privilege over this document. However, as discussed further below, we maintain our assertion of the deliberative process privilege over this document. Accordingly, we will not produce this chart. FHFA , FHFA , FHFA , and FHFA are memoranda prepared by FHFA staff concerning the GSEs risk assessment for the first quarter We have reconsidered our assertion of the deliberative process privilege over these four documents 3 Because the list of documents attached to your October 29, did not include any of the documents that we had addressed in our letter dated September 1, 2015, we assume that you are no longer challenging the documents that we addressed in our September 1, 2015 letter. A018

67 Case 1:13-cv MMS Document Filed 12/07/15 Page 21 of and have decided to withdraw our assertion of the deliberative process privilege. However, we maintain our assertion of the bank examination privilege over the same four documents. Accordingly, we will not produce these memoranda. FHFA is a presentation from the FHFA Office of the Chief Accountant dated October 29, We have reconsidered our position that our assertion of privilege encompassed the entire document and have decided to withdraw our assertion of the deliberative process privilege over portions of the document. We will, therefore, produce this presentation in redacted form. B. Insufficient Descriptions You assert that we have provided insufficient privilege justifications for the following six documents: UST ; UST ; UST ; UST ; UST ; and UST As discussed above, we have decided to withdraw our privilege assertion over UST We believe that resolves any dispute as to that document. UST and UST were each justified as a Predecisional analysis of GSE financial projections prepared by Treasury staff. We believe this description is sufficient. These two documents were attached to a non-privileged chain discussing Treasury s preparation of a presentation concerning the potential amendments to the PSPAs. These two documents contain financial projections regarding Fannie Mae and Freddie Mac. This substance is reflected in our justification. UST was justified as a Draft memorandum prepared by Treasury staff containing predecisional deliberations regarding housing policy reform, including the future of the GSEs. We believe this description is sufficient. The draft memorandum is addressed from Under Secretary for Domestic Finance Mary Miller to Secretary Geithner, with the subject line Housing Policy Options. The draft memorandum concerns various housing policy ideas. This substance is reflected in our justification. UST was justified as a Draft policy paper prepared by Treasury staff containing predecisional deliberations regarding housing finance reform. We believe this description is sufficient. The draft paper is an iteration of a housing finance reform policy paper document that was never finalized. The draft paper concerns numerous broad housing policy reforms, some of which still have not received a final decision by the agency. This substance is reflected in the justification. UST was justified as Draft memorandum prepared by Treasury staff containing predecisional deliberations related to various FHFA/GSE housing finance initiatives. We believe this description is proper. This draft memorandum was prepared by a member of Treasury staff and summarizes a July 27, 2012 meeting between Treasury and FHFA, as indicated in the non-privileged cover UST The memorandum contains A019

68 Case 1:13-cv MMS Document Filed 12/07/15 Page 22 of summaries of the status of discussions between the two agencies regarding housing policy initiatives. This substance is reflected in the justification. C. Not Predecisional You have asserted that the following documents are not predecisional: UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; and UST As discussed above, we have decided to withdraw our privilege assertion over UST We believe that action resolves any dispute as to that document. UST , UST , UST , UST , UST , UST , UST , and UST are draft versions of a letter from Under Secretary for Domestic Finance Mary Miller to the employees of the GSEs and related s. These drafts reflect Government deliberations concerning how to communicate certain messages about policy decisions to a group of individuals; these drafts have been properly withheld under the deliberative process privilege because the decision regarding the communication had not yet been made. The letter was never sent. However, a version shared with FHFA Acting Director Edward DeMarco UST has already been produced. We will not withdraw our assertion of privilege over the unfinished draft versions you have identified or any others that may be on the privilege log, including: UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; and UST UST is a copy of an August 9, 2012 memorandum regarding the Domestic Finance Report for the weeks of August 13 and 20, This report was sent to Secretary Geithner on August 9, 2012, and was re-circulated on August 20, It reflects predecisional deliberations concerning the Third Amendment before the agreement was signed, as well as other policy decisions that were not yet made when the memorandum was sent again on August 20, We will not withdraw our assertion of privilege over this memorandum. UST is an internal draft Treasury document dated August 1, 2012, and attached to an sent that same day, detailing the proposed changes to be incorporated into the Third Amendment and discussing the rationale and expected timing of the amendment. It is substantially similar to another document UST that you have identified. These documents are predecisional because they were created and shared before the Third Amendment was adopted and contain deliberations concerning Treasury s rationale for entering into it. We would note, however, that a final version of a document with similar substance was produced in full to plaintiffs because it was shared with GSE management. See, e.g., UST We will not withdraw our assertion of privilege over these internal draft documents. A020

69 Case 1:13-cv MMS Document Filed 12/07/15 Page 23 of If you nevertheless contend that your purported need overcomes any privilege we have asserted and will request a review of these documents, we believe you should identify to the court the following variations of similar documents with the same general substance: UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; and UST UST and UST are internal charts, dated August 16, 2012 and June 21, 2012 respectively, that address the status of various ongoing Treasury policy initiatives. As an initial matter, both of these charts pre-date the Third Amendment. These charts are also substantially similar to three other documents you have identified UST , UST , and UST These charts are predecisional because they reflect contemporaneous deliberations regarding ongoing policy initiatives relating both to the GSEs and other Treasury policies before they were adopted. We would note, however, that we previously withdrew our assertion of privilege over and produced the charts of this type that were provided to the Secretary. See, e.g., UST Additionally, in reviewing these documents, we have identified four other versions sent to Secretary Geithner, which we will produce and remove from our log UST ; UST ; UST ; and UST If you nevertheless contend that your purported need overcomes any privilege we have asserted and will request a review of these documents, we believe you should identify to the court the following variations of similar documents with the same general substance: UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; 4 Consistent with our previous agreement, we will redact non-responsive material from the compilation of documents provided to Secretary Geithner. A021

70 Case 1:13-cv MMS Document Filed 12/07/15 Page 24 of UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; and UST UST is a projection dated August 27, 2012, of the budgetary costs of Treasury s support of the GSEs, prepared for OMB in anticipation of the Fiscal Year 2014 Federal budget. This document is predecisional because it concerns matters that had not yet A022

71 Case 1:13-cv MMS Document Filed 12/07/15 Page 25 of occurred. We will not withdraw our assertion of the deliberative process privilege over this document. UST is a memorandum dated December 14, 2011, from Under Secretary for Domestic Finance Mary Miller to Secretary Geithner with the subject Potential GSE Restructuring Options. It is identical to another document you have challenged UST This memorandum was written nearly a year before the execution of the Third Amendment and is predecisional. It is also deliberative because it presents multiple policy options to the Secretary with Treasury staff views of them. We will not withdraw our assertion of privilege over this document. UST is a memorandum dated January 25, 2012, from Michael Stegman to Secretary Geithner with the subject Summary of Mortgage Finance Market Reform Proposals. It is identical to another document you have challenged UST This memorandum is predecisional because it presents policy options to the Secretary, including options with respect to certain issues that have yet to be decided. Because the memorandum presents the Secretary with Treasury staff views on policy initiatives, it is also deliberative. We will not withdraw our assertion of privilege over this document. UST is set of financial projections regarding the GSEs provided by Grant Thornton to Treasury on March 12, These projections were relied upon during deliberations concerning the Third Amendment and other policy discussions within Treasury and are predecisional. UST is a draft of speech for Secretary Geithner that was ultimately delivered on February 2, The version you identified, dated January 28, 2012, is predecisional because it is a non-final version dated several days before the speech was finalized and delivered. We note that the final version, as delivered, is publicly available at: This version was also produced previously UST If you nevertheless contend that your purported need overcomes any privilege we have asserted and will request a review of these documents, we believe you should identify to the court the following variations of similar documents with the same general substance: UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; A023

72 Case 1:13-cv MMS Document Filed 12/07/15 Page 26 of UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; and UST UST is an internal document dated June 1, 2012, concerning the status of potential covenants to be incorporated into the Third Amendment. This document precedes the Third Amendment and is predecisional. We will not withdraw our assertion of privilege over this document. If you nevertheless contend that your purported need overcomes any privilege we have asserted and will request a review of these documents, we believe you should identify to the court the following variations of similar documents with the same general substance: UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; and UST D. Communications Outside The White House You have challenged the following documents on your assumption that they are [c]ommunications outside the White House not covered by PCP : UST ; UST ; UST ; and UST UST and UST are communications that were sent directly to or from a White House employee with an address ending in who.eop.gov, as reflected on the privilege log. UST is an chain that was produced to you with only one part of one sentence redacted pursuant to the presidential communication privilege. Although the top of the chain was sent internally among Treasury staff, the one redacted line is contained in an e- mail sent directly from a White House employee with an address ending in who.eop.gov, as evident on the face of the document. UST is a draft memorandum on White House letterhead that was developed by White House advisors and Treasury staff in connection with presidential decisionmaking on potential housing finance reforms. The draft memorandum presents specific policy recommendations for presidential approval and contains a candid analysis of the pros and cons of the particular proposed reforms. It was properly withheld under both the deliberative process and presidential communication privileges. A024

73 Case 1:13-cv MMS Document Filed 12/07/15 Page 27 of E. Factual Material (Other Than Financial Models) You have challenged our privilege assertion with respect to the following documents because you contend they contain factual materials not protected by the deliberative process privilege: UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; FHFA ; FHFA ; FHFA ; FHFA ; FHFA ; FHFA ; FHFA ; FHFA ; FHFA ; FHFA ; and FHFA Other than those documents you have challenged on other grounds and we have specifically addressed above, we will not address these documents individually. We have completed a comprehensive review of these documents and believe the privilege was correctly asserted because they contain non-factual deliberative information or factual information that is not reasonably segregable from the deliberative information. If you provide us with your basis for contending that these specific documents are entirely factual, we may be able to narrow the dispute. F. Factual Material (Financial Models) You have challenged our assertion of privilege over the following documents because they contain financial models that you contend are not protected by the deliberative process privilege: UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; and FHFA As discussed above, we disagree with your argument that financial models are factual documents, and thus are not covered by the deliberative process privilege. We believe that the court can resolve this legal issue without in camera review of individual privileged documents. However, we agree the court may benefit from reviewing samples of the types of projections you contend are not covered by the deliberative process privilege. There are numerous examples of projections for which we have previously waived privilege available in the Administrative Record from the district court action and in documents we have produced in this action. If you nevertheless contend that your purported need overcomes any privilege we have asserted and will request a review of these documents, we believe you should identify to the court the following variations of similar documents with the same general substance: A025

74 Case 1:13-cv MMS Document Filed 12/07/15 Page 28 of UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; UST ; and UST G. Documents We Have Deemed Not Responsive You have challenged our designation of the following three documents as not responsive: UST ; UST ; and UST UST is a draft memorandum from Deputy Assistant Secretary Timothy Bowler to Under Secretary for Domestic Finance Mary Miller concerning a meeting with the GSE management teams on August 9, This was marked not responsive during the review process after a placeholder had been produced. We now agree that it is responsive and we will add the entry to our privilege log. We note that UST is a nearly exact duplicate of two other documents (UST and UST ) already on our log. Additionally, we have identified the final version of the memorandum and will produce it in full because the substance concerns communications between Treasury and the GSEs. UST and UST were marked not responsive because, as discussed above, plaintiffs abandoned the request for documents reflecting communications between Treasury and DOJ relating to [the] Net Worth Sweep, as indicated in the letter from David Thompson to Gregg Schwind dated October 6, We will not add these entries to our privilege log. * * * Please let me know if you have additional questions or comments. Very truly yours, /s/ Elizabeth M. Hosford ELIZABETH M. HOSFORD Assistant Director Commercial Litigation Branch A026

75 Case 1:13-cv MMS Document Filed 12/07/15 Page 29 of 68 EXHIBIT 3 A027

76 Case 1:13-cv MMS Document Filed 12/07/15 Page 30 of 68 A028

77 Case 1:13-cv MMS Document Filed 12/07/15 Page 31 of 68 A029

78 Case 1:13-cv MMS Document Filed 12/07/15 Page 32 of 68 A030

79 Case 1:13-cv MMS Document Filed 12/07/15 Page 33 of 68 A031

80 Case 1:13-cv MMS Document Filed 12/07/15 Page 34 of 68 A032

81 Case 1:13-cv MMS Document Filed 12/07/15 Page 35 of 68 EXHIBIT 4 A033

82 Case 1:13-cv MMS Document Filed 12/07/15 Page 36 of 68 U.S. Department of Justice Civil Division REK:KMD:GMSchwind Telephone: (202) Facsimile: (202) Washington, DC By and U.S. Mail July 10, 2015 Vincent J. Colatriano Cooper & Kirk, PLLC 1523 New Hampshire Ave. NW Washington, D.C Re: Fairholme Funds, Inc. et al., v. United States, No C (Fed. Cl.) Dear Mr. Colatriano: Please be advised that the Government inadvertently provided plaintiffs several documents it considers privileged. Pursuant to paragraph 13 of the Protective Order, the Government is asserting privilege over the documents listed below. We request that plaintiffs immediately destroy or delete all copies thereof, as well as all notes, memoranda or other documents that summarize, discuss or quote the documents, and delete any copy of the documents, or any portion thereof, from any word processing or database tape or disk plaintiffs maintain. Further, please notify us immediately if plaintiffs have disclosed any of the documents to any other parties. The Bates numbers of the documents inadvertently produced are: UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST If you have any questions, please do not hesitate to contact me. Very truly yours, /s/ Gregg M. Schwind Gregg M. Schwind Senior Trial Counsel U. S. Department of Justice Gregg.Schwind@usdoj.gov A034

83 Case 1:13-cv MMS Document Filed 12/07/15 Page 37 of 68 EXHIBIT 5 A035

84 Case 1:13-cv MMS Document Filed 12/07/15 Page 38 of 68 From: Sent: To: Cc: Subject: Brian Barnes Friday, July 17, :59 PM Hosford, Elizabeth (CIV); Schwind, Gregg (CIV) Calhoun, Era C. (CIV); David Thompson; Vince Colatriano; Pete Patterson RE: Fairholme v. US; Clawback Letter Hi Liz, It appears that not all of the documents identified in the Government s letter are on Treasury s final privilege log (UST , UST et seq., UST et seq., and UST et seq. don t show up when we run text searches). Could you please either direct me to the page on the privilege log where those documents appear or confirm that the Government will be producing a supplemental privilege log for them today as required by paragraph 13 of the Protective Order? Many thanks, Brian W. Barnes Cooper & Kirk, PLLC (202) From: Schwind, Gregg (CIV) [mailto:gregg.schwind@usdoj.gov] Sent: Friday, July 10, :02 PM To: Vince Colatriano; Brian Barnes; David Thompson; Pete Patterson Cc: Hosford, Elizabeth (CIV); Calhoun, Era C. (CIV) Subject: Fairholme v. US; Clawback Letter Vince, Please see the attached letter regarding a small number of privileged documents inadvertently produced in discovery. Let us know if you have any questions. Gregg Gregg M. Schwind Senior Trial Counsel U. S. Department of Justice (202) Overnight address: 1100 L Street, N.W. Washington, D.C A036

85 Case 1:13-cv MMS Document Filed 12/07/15 Page 39 of 68 EXHIBIT 6 A037

86 Case 1:13-cv MMS Document Filed 12/07/15 Page 40 of 68 U.S. Department of Justice Civil Division REK:KMD:EHosford Telephone: (202) Washington, DC By July 28, 2015 Vincent J. Colatriano Cooper & Kirk, PLLC 1523 New Hampshire Ave. NW Washington, D.C Re: Fairholme Funds, Inc. et al., v. United States, No C (Fed. Cl.) Dear Mr. Colatriano, In a letter dated July 10, 2015, we notified you that the Government intended to assert privilege over certain documents that were inadvertently produced to plaintiffs during the course of discovery, and we requested that plaintiffs destroy or delete any copies of the identified documents pursuant to paragraph 13 of the Protective Order. The purpose of this letter is to notify you of our intent to modify our position with regard to certain documents identified in the July 10, 2015 letter. First, the Government withdraws its privilege assertions with respect to the following documents: UST UST UST UST We will provide you with copies of the documents listed above. A038

87 Case 1:13-cv MMS Document Filed 12/07/15 Page 41 of Second, with respect to the remaining documents identified in our July 10, 2015 letter and listed below, enclosed please find a revised privilege log detailing the basis for our privilege claims. To the extent that portions of those documents are not privileged, we will provide copies of those documents in redacted form. UST UST UST UST UST UST UST UST If you have any questions, please do not hesitate to contact me. Very truly yours, /s/ Elizabeth Hosford Elizabeth Hosford Assistant Director Commercial Litigation Branch Enclosure 1 Two other documents, UST UST and UST UST , are identical or nearly identical to UST UST Although these documents were initially withheld in full, we have identified non-privileged portions and will provide you with redacted versions. A039

88 Case 1:13-cv MMS Document Filed 12/07/15 Page 42 of 68 EXHIBIT 7 A040

89 Case 1:13-cv MMS Document Filed 12/07/15 Page 43 of 68 From: Sent: To: Cc: Subject: Attachments: Vince Colatriano Wednesday, August 12, :53 PM Hosford, Elizabeth (CIV) David Thompson; Brian Barnes; Howard Nielson; Pete Patterson; Bezak, Reta E. (CIV); Schiavetti, Anthony F. (CIV); Laufgraben, Eric E. (CIV) RE: Fairholme -- Privilege Logs Privilege Log Excerpts Prepared on pdf; Ltr to Scwhind re Discovery.pdf Liz Good afternoon. I hope you enjoyed your vacation. I m writing to follow up on a couple of items we discussed on July 29 regarding our ongoing review of the Government s final privilege logs: Could you let me know where things stand in the Government s review of our list of the 2700-plus documents (discussed in the below ) that have been withheld for privilege but do not appear on either of the final privilege logs? As you ll recall, we discussed during the July 29 call our thoughts regarding a way to begin to tee up for resolution at least some of the concerns we have regarding the Government s privilege assertions. Specifically, we thought it made sense to prepare a list of withheld documents appearing on the privilege log, from a discrete time period near the official adoption of the net worth sweep, that raise issues regarding the Government s assertions of deliberative process privilege. We have therefore prepared the attached excerpt from the Government s privilege logs that focuses primarily (though not exclusively) on documents created during the period August 7-13, Please note the following regarding this effort: o We believe the documents on this list raise such issues as (1) the adequacy of the privilege logs document descriptions (for example, many of the log entries contain only very vague descriptions noting simply that the documents reflect predecisional deliberations concerning proposed modifications to PSPAs ); (2) the applicability in this case of the deliberative process privilege to documents that are likely probative of the Government s motivations in implementing the net worth sweep; and (3) whether, even assuming that the Government may be entitled to assert the deliberative process privilege with respect to any such documents, our evidentiary need for such documents may outweigh any harm to the Government that might result from production of the documents. We therefore believe that resolving (either through negotiation or an appropriate motion) the privilege issues regarding these documents may provide a template for the resolution of many of the Government s other assertions of this privilege. It may also provide guidance 1 A041

90 Case 1:13-cv MMS Document Filed 12/07/15 Page 44 of 68 for the resolution of other Government assertions of qualified privileges (such as the bank examination and presidential communications privileges). o o We have attempted to narrow the attached list down to a fairly manageable number of documents, but it is still fairly lengthy. We strongly suspect, however, that many of the documents on this list are duplicates or near-duplicates of each other. We are hopeful that it should be fairly easy for the Government to identify such duplicates and near-duplicates so that we can come up with a more manageable list of documents that can, if necessary, be submitted to the Court for in camera review in the likely event that the parties need the Court s assistance in resolving this issue. Once you ve had a chance to review this list, it probably makes sense for us to convene a short conference call early next week to discuss possible next steps. Finally, I wanted to raise one other discovery matter. As you may recall, we had discussions, primarily with Gregg Schwind, about the Government s search for and production of hard copy documents that were responsive to our discovery requests. We first raised this issue, and discussed examples of the kinds of documents we were thinking of, in a May 21, 2014 letter to Gregg, a copy of which is attached, although we subsequently followed up on several occasions. It was our understanding that the Government was not limiting its document production efforts to it searches of ESI, but was instead also searching for, and would produce, responsive hard copy documents. In fact, at the January 28 status conference, Gregg reported that such hard-copy documents had been identified and loaded onto the Government s document review platform. Now that the Government has completed its document productions, we wanted to raise some concerns we have about the production of such hard copy documents. Based on our review of the productions and the privilege logs, it appears that at least some of the examples of hard copy documents we had identified were neither produced nor withheld as privileged. We would appreciate it if you could look into this and let us know (1) which categories of hard copy documents were gathered by the Government and loaded onto its document review platform; and (2) why some of the hard copy materials we requested were not produced. As always, please let me know if you have any questions. Thanks Vince Vincent J. Colatriano Cooper & Kirk, PLLC 2 A042

91 Case 1:13-cv MMS Document Filed 12/07/15 Page 45 of New Hampshire Ave. NW Washington, D.C From: Vince Colatriano Sent: Thursday, July 30, :20 AM To: 'Hosford, Elizabeth (CIV)' Cc: David Thompson Brian Barnes Howard Nielson Pete Patterson Bezak, Reta E. (CIV) Schiavetti, Anthony F. (CIV) Laufgraben, Eric E. (CIV) Subject: RE: Fairholme Privilege Logs Liz Good morning. As a follow-up to our discussion of yesterday afternoon, I m attaching a list identifying those documents that have been withheld for privilege but that do not appear on either of the Government s final privilege logs. As we discussed, because these lists were compiled from the results of our searches, in the Government s document productions, for the phrase withheld for privilege, it s possible that the lists are under-inclusive, i.e., that they may not identify every withheld document that did not make it onto a final privilege log. The document is password-protected. I will send you the password in a separate . As we discussed, we have been assuming that the documents on this list were initially withheld for privilege but that the Government ultimately decided that they were not privileged. If that is the case, we request that the documents be produced as soon as possible. In any event, we would appreciate it if you could let us know the status of these documents at your earliest opportunity. Thanks very much Vince Vincent J. Colatriano Cooper & Kirk, PLLC 1523 New Hampshire Ave. NW Washington, D.C From: Hosford, Elizabeth (CIV) [mailto:elizabeth.hosford@usdoj.gov] Sent: Wednesday, July 29, :28 PM To: Vince Colatriano <vcolatriano@cooperkirk.com> 3 A043

92 Cc: David Thompson Brian Barnes Howard Nielson Pete Patterson Bezak, Reta E. (CIV) Schiavetti, Anthony F. (CIV) Laufgraben, Eric E. (CIV) Subject: RE: Fairholme Privilege Logs Great. Thanks. From: Vince Colatriano Sent: Wednesday, July 29, :18 AM To: Hosford, Elizabeth (CIV) Cc: David Thompson; Brian Barnes; Howard Nielson; Pete Patterson; Bezak, Reta E. (CIV); Schiavetti, Anthony F. (CIV); Laufgraben, Eric E. (CIV) Subject: RE: Fairholme -- Privilege Logs Here s the call-in info for today s call. Date: Wednesday, July 29, 2015 Time: 03:00 PM Eastern Daylight Time Dial-in No.: Access Code: Thanks Vince Case 1:13-cv MMS Document Filed 12/07/15 Page 46 of 68 Vincent J. Colatriano Cooper & Kirk, PLLC 1523 New Hampshire Ave. NW Washington, D.C From: Vince Colatriano Sent: Wednesday, July 29, :30 AM To: Hosford, Elizabeth (CIV) <Elizabeth.Hosford@usdoj.gov> Cc: David Thompson <dthompson@cooperkirk.com>; Brian Barnes <BBarnes@cooperkirk.com>; Howard Nielson <hnielson@cooperkirk.com>; Pete Patterson <ppatterson@cooperkirk.com>; Bezak, Reta E. (CIV) <Reta.E.Bezak@usdoj.gov>; Schiavetti, Anthony F. (CIV) <Anthony.F.Schiavetti@usdoj.gov>; Laufgraben, Eric E. (CIV) <Eric.E.Laufgraben@usdoj.gov> Subject: Re: Fairholme Privilege Logs Liz -- I think 3 pm should work for us. We'll set up a call-in number. Thanks Vince Sent from my iphone On Jul 28, 2015, at 5:01 PM, Hosford, Elizabeth (CIV) <Elizabeth.Hosford@usdoj.gov> wrote: 4 A044

93 Vince: Are you all available at 1:30 or 3 tomorrow? Thanks. Liz From: Vince Colatriano [mailto:vcolatriano@cooperkirk.com] Sent: Sunday, July 26, :43 PM To: Hosford, Elizabeth (CIV) Cc: David Thompson; Brian Barnes; Howard Nielson; Pete Patterson; Bezak, Reta E. (CIV); Schiavetti, Anthony F. (CIV) Subject: RE: Fairholme -- Privilege Logs Liz Unfortunately, Monday no longer works on our end for a call. Would it be possible to reschedule it for Wednesday? Apologies for the change in plans. Take care Vince Case 1:13-cv MMS Document Filed 12/07/15 Page 47 of 68 Vincent J. Colatriano Cooper & Kirk, PLLC 1523 New Hampshire Ave., NW Washington, D.C From: Hosford, Elizabeth (CIV) [mailto:elizabeth.hosford@usdoj.gov] Sent: Wednesday, July 22, :48 PM To: Vince Colatriano <vcolatriano@cooperkirk.com> Cc: David Thompson <dthompson@cooperkirk.com>; Brian Barnes <BBarnes@cooperkirk.com>; Howard Nielson <hnielson@cooperkirk.com>; Pete Patterson <ppatterson@cooperkirk.com>; Bezak, Reta E. (CIV) <Reta.E.Bezak@usdoj.gov>; Schiavetti, Anthony F. (CIV) <Anthony.F.Schiavetti@usdoj.gov> Subject: RE: Fairholme Privilege Logs Let s do 3 p.m. Liz From: Vince Colatriano [mailto:vcolatriano@cooperkirk.com] Sent: Wednesday, July 22, :04 PM To: Hosford, Elizabeth (CIV) Cc: David Thompson; Brian Barnes; Howard Nielson; Pete Patterson; Bezak, Reta E. (CIV); Schiavetti, Anthony F. (CIV) Subject: RE: Fairholme -- Privilege Logs 5 A045

94 Liz That should work. Any time after 2:30 or so should work on our end. Let me know what time works for you. Thanks Vince Case 1:13-cv MMS Document Filed 12/07/15 Page 48 of 68 Vincent J. Colatriano Cooper & Kirk, PLLC 1523 New Hampshire Ave. NW Washington, D.C From: Hosford, Elizabeth (CIV) Sent: Wednesday, July 22, :46 AM To: Vince Colatriano Cc: David Thompson; Brian Barnes; Howard Nielson; Pete Patterson; Bezak, Reta E. (CIV); Schiavetti, Anthony F. (CIV) Subject: RE: Fairholme Privilege Logs Vince - Friday doesn't work for us, but we can do a call on Monday afternoon. Liz Sent from my Verizon Wireless 4G LTE smartphone Original message From: Vince Colatriano <vcolatriano@cooperkirk.com> Date: 07/21/ :40 AM (GMT-05:00) To: "Hosford, Elizabeth (CIV)" <EHosford@CIV.USDOJ.GOV> Cc: David Thompson <dthompson@cooperkirk.com>, Brian Barnes <BBarnes@cooperkirk.com>, Howard Nielson <hnielson@cooperkirk.com>, Pete Patterson <ppatterson@cooperkirk.com>, "Bezak, Reta E. (CIV)" <rbezak@civ.usdoj.gov> Subject: Fairholme -- Privilege Logs Liz Good morning. Although we are continuing to review the privilege logs that we were sent on July 10, we should soon be in a position to talk about some issues raised by those logs that we believe it may make sense to either seek to resolve or to tee up for the Court. We would therefore like to schedule a conference call for Friday of this week to discuss privilege issues. (We can also meet in person if you think that would be more efficient, though even then, some folks on our end will need to participate by phone). Please let us know as soon as you can whether Friday works for you. 6 A046

95 Thanks very much Vince Case 1:13-cv MMS Document Filed 12/07/15 Page 49 of 68 Vincent J. Colatriano Cooper & Kirk, PLLC 1523 New Hampshire Ave., NW Washington, D.C NOTICE: This is from the law firm of Cooper & Kirk, PLLC ("C&K"), and is intended solely for the use of the individual(s) to whom it is addressed. If you believe you received this e- mail in error, please notify the sender immediately, delete the from your computer and do not copy or disclose it to anyone else. If you are not an existing client of C&K, do not construe anything in this to make you a client unless it contains a specific statement to that effect and do not disclose anything to C&K in reply that you expect to be held in confidence. If you properly received this as a client, co-counsel or retained expert of C&K, you should maintain its contents in confidence in order to preserve any attorney-client or work product privilege that may be available to protect confidentiality. 7 A047

96 Case 1:13-cv MMS Document Filed 12/07/15 Page 50 of 68 EXHIBIT 8 A048

97 Case 1:13-cv MMS Document Filed 12/07/15 Page 51 of 68 From: Sent: To: Cc: Subject: Attachments: Hosford, Elizabeth (CIV) Monday, August 17, :29 PM Vince Colatriano David Thompson; Brian Barnes; Howard Nielson; Pete Patterson; Bezak, Reta E. (CIV); Schiavetti, Anthony F. (CIV); Laufgraben, Eric E. (CIV); Koprowski, Agatha M. (CIV) RE: Fairholme -- Privilege Logs Copy of Responsive Duplicate Identification.xlsx Vince - In response to your inquiry, below, regarding approximately 2,700 documents that were initially withheld for privilege, but did not appear on our final privilege log, the documents you identified fall into four broad categories: 1. The bulk of the documents you identified (approximately 1,800) were excluded from our productions because they are exact duplicates of other documents in the production. This occurred because one custodian s documents were inadvertently loaded into the database twice. For your convenience, we have provided a list of all of these documents and identify their duplicates, all of which either appear on the privilege log or have been produced to you in full or redacted form. 2. Approximately 600 documents were inadvertently left off of our final privilege log, due to a technical error. We will provide a revised privilege log that adds those documents at the end of the list, for ease of review. 3. Several documents (approximately 45) are responsive to the Court s February 26, 2014 order regarding the scope of discovery, and the Government has withdrawn, in whole or in part, its initial privilege designation. Approximately 10 of those documents were produced to Fairholme in the Government s July 20, 2015 UST Document Replacement production. The remaining documents were not included in an image replacement production, due to a technical error, and will be produced to Fairholme. We will provide a list of the documents that will be included in a future production. The documents that appeared in the July 20 production are the following: UST UST UST UST UST UST UST UST UST UST Approximately 250 documents were determined to be non-responsive to the Court s February 26, 2014 order regarding the scope of discovery. Due to the rolling nature of our productions and privilege logs, these determinations were made after the documents had been included in a production (as slipsheets). We will provide a list of these documents. Please let me know if you have any additional questions regarding these documents. 1 A049

98 Case 1:13-cv MMS Document Filed 12/07/15 Page 52 of 68 Liz From: Vince Colatriano Sent: Thursday, July 30, :20 AM To: Hosford, Elizabeth (CIV) Cc: David Thompson; Brian Barnes; Howard Nielson; Pete Patterson; Bezak, Reta E. (CIV); Schiavetti, Anthony F. (CIV); Laufgraben, Eric E. (CIV) Subject: RE: Fairholme -- Privilege Logs Liz Good morning. As a follow-up to our discussion of yesterday afternoon, I m attaching a list identifying those documents that have been withheld for privilege but that do not appear on either of the Government s final privilege logs. As we discussed, because these lists were compiled from the results of our searches, in the Government s document productions, for the phrase withheld for privilege, it s possible that the lists are under-inclusive, i.e., that they may not identify every withheld document that did not make it onto a final privilege log. The document is password-protected. I will send you the password in a separate . As we discussed, we have been assuming that the documents on this list were initially withheld for privilege but that the Government ultimately decided that they were not privileged. If that is the case, we request that the documents be produced as soon as possible. In any event, we would appreciate it if you could let us know the status of these documents at your earliest opportunity. Thanks very much Vince Vincent J. Colatriano Cooper & Kirk, PLLC 1523 New Hampshire Ave. NW Washington, D.C From: Hosford, Elizabeth (CIV) [mailto:elizabeth.hosford@usdoj.gov] Sent: Wednesday, July 29, :28 PM To: Vince Colatriano <vcolatriano@cooperkirk.com> Cc: David Thompson <dthompson@cooperkirk.com>; Brian Barnes <BBarnes@cooperkirk.com>; Howard Nielson <hnielson@cooperkirk.com>; Pete Patterson <ppatterson@cooperkirk.com>; Bezak, Reta E. (CIV) <Reta.E.Bezak@usdoj.gov>; Schiavetti, Anthony F. (CIV) <Anthony.F.Schiavetti@usdoj.gov>; Laufgraben, Eric E. (CIV) <Eric.E.Laufgraben@usdoj.gov> Subject: RE: Fairholme Privilege Logs 2 A050

99 Great. Thanks. From: Vince Colatriano Sent: Wednesday, July 29, :18 AM To: Hosford, Elizabeth (CIV) Cc: David Thompson; Brian Barnes; Howard Nielson; Pete Patterson; Bezak, Reta E. (CIV); Schiavetti, Anthony F. (CIV); Laufgraben, Eric E. (CIV) Subject: RE: Fairholme -- Privilege Logs Here s the call-in info for today s call. Date: Wednesday, July 29, 2015 Time: 03:00 PM Eastern Daylight Time Dial-in No.: Access Code: Thanks Vince Case 1:13-cv MMS Document Filed 12/07/15 Page 53 of 68 Vincent J. Colatriano Cooper & Kirk, PLLC 1523 New Hampshire Ave. NW Washington, D.C From: Vince Colatriano Sent: Wednesday, July 29, :30 AM To: Hosford, Elizabeth (CIV) <Elizabeth.Hosford@usdoj.gov> Cc: David Thompson <dthompson@cooperkirk.com>; Brian Barnes <BBarnes@cooperkirk.com>; Howard Nielson <hnielson@cooperkirk.com>; Pete Patterson <ppatterson@cooperkirk.com>; Bezak, Reta E. (CIV) <Reta.E.Bezak@usdoj.gov>; Schiavetti, Anthony F. (CIV) <Anthony.F.Schiavetti@usdoj.gov>; Laufgraben, Eric E. (CIV) <Eric.E.Laufgraben@usdoj.gov> Subject: Re: Fairholme Privilege Logs Liz -- I think 3 pm should work for us. We'll set up a call-in number. Thanks Vince Sent from my iphone On Jul 28, 2015, at 5:01 PM, Hosford, Elizabeth (CIV) <Elizabeth.Hosford@usdoj.gov> wrote: Vince: Are you all available at 1:30 or 3 tomorrow? Thanks. Liz 3 A051

100 From: Vince Colatriano Sent: Sunday, July 26, :43 PM To: Hosford, Elizabeth (CIV) Cc: David Thompson; Brian Barnes; Howard Nielson; Pete Patterson; Bezak, Reta E. (CIV); Schiavetti, Anthony F. (CIV) Subject: RE: Fairholme -- Privilege Logs Liz Unfortunately, Monday no longer works on our end for a call. Would it be possible to reschedule it for Wednesday? Apologies for the change in plans. Take care Vince Case 1:13-cv MMS Document Filed 12/07/15 Page 54 of 68 Vincent J. Colatriano Cooper & Kirk, PLLC 1523 New Hampshire Ave., NW Washington, D.C From: Hosford, Elizabeth (CIV) [mailto:elizabeth.hosford@usdoj.gov] Sent: Wednesday, July 22, :48 PM To: Vince Colatriano <vcolatriano@cooperkirk.com> Cc: David Thompson <dthompson@cooperkirk.com>; Brian Barnes <BBarnes@cooperkirk.com>; Howard Nielson <hnielson@cooperkirk.com>; Pete Patterson <ppatterson@cooperkirk.com>; Bezak, Reta E. (CIV) <Reta.E.Bezak@usdoj.gov>; Schiavetti, Anthony F. (CIV) <Anthony.F.Schiavetti@usdoj.gov> Subject: RE: Fairholme Privilege Logs Let s do 3 p.m. Liz From: Vince Colatriano [mailto:vcolatriano@cooperkirk.com] Sent: Wednesday, July 22, :04 PM To: Hosford, Elizabeth (CIV) Cc: David Thompson; Brian Barnes; Howard Nielson; Pete Patterson; Bezak, Reta E. (CIV); Schiavetti, Anthony F. (CIV) Subject: RE: Fairholme -- Privilege Logs Liz That should work. Any time after 2:30 or so should work on our end. Let me know what time works for you. Thanks 4 A052

101 Case 1:13-cv MMS Document Filed 12/07/15 Page 55 of 68 Vince Vincent J. Colatriano Cooper & Kirk, PLLC 1523 New Hampshire Ave. NW Washington, D.C From: Hosford, Elizabeth (CIV) Sent: Wednesday, July 22, :46 AM To: Vince Colatriano Cc: David Thompson; Brian Barnes; Howard Nielson; Pete Patterson; Bezak, Reta E. (CIV); Schiavetti, Anthony F. (CIV) Subject: RE: Fairholme Privilege Logs Vince - Friday doesn't work for us, but we can do a call on Monday afternoon. Liz Sent from my Verizon Wireless 4G LTE smartphone Original message From: Vince Colatriano <vcolatriano@cooperkirk.com> Date: 07/21/ :40 AM (GMT-05:00) To: "Hosford, Elizabeth (CIV)" <EHosford@CIV.USDOJ.GOV> Cc: David Thompson <dthompson@cooperkirk.com>, Brian Barnes <BBarnes@cooperkirk.com>, Howard Nielson <hnielson@cooperkirk.com>, Pete Patterson <ppatterson@cooperkirk.com>, "Bezak, Reta E. (CIV)" <rbezak@civ.usdoj.gov> Subject: Fairholme -- Privilege Logs Liz Good morning. Although we are continuing to review the privilege logs that we were sent on July 10, we should soon be in a position to talk about some issues raised by those logs that we believe it may make sense to either seek to resolve or to tee up for the Court. We would therefore like to schedule a conference call for Friday of this week to discuss privilege issues. (We can also meet in person if you think that would be more efficient, though even then, some folks on our end will need to participate by phone). Please let us know as soon as you can whether Friday works for you. Thanks very much Vince 5 A053

102 Case 1:13-cv MMS Document Filed 12/07/15 Page 56 of 68 Vincent J. Colatriano Cooper & Kirk, PLLC 1523 New Hampshire Ave., NW Washington, D.C NOTICE: This is from the law firm of Cooper & Kirk, PLLC ("C&K"), and is intended solely for the use of the individual(s) to whom it is addressed. If you believe you received this e- mail in error, please notify the sender immediately, delete the from your computer and do not copy or disclose it to anyone else. If you are not an existing client of C&K, do not construe anything in this to make you a client unless it contains a specific statement to that effect and do not disclose anything to C&K in reply that you expect to be held in confidence. If you properly received this as a client, co-counsel or retained expert of C&K, you should maintain its contents in confidence in order to preserve any attorney-client or work product privilege that may be available to protect confidentiality. NOTICE: This is from the law firm of Cooper & Kirk, PLLC ("C&K"), and is intended solely for the use of the individual(s) to whom it is addressed. If you believe you received this in error, please notify the sender immediately, delete the from your computer and do not copy or disclose it to anyone else. If you are not an existing client of C&K, do not construe anything in this to make you a client unless it contains a specific statement to that effect and do not disclose anything to C&K in reply that you expect to be held in confidence. If you properly received this as a client, co-counsel or retained expert of C&K, you should maintain its contents in confidence in order to preserve any attorney-client or work product privilege that may be available to protect confidentiality. 6 A054

103 Case 1:13-cv MMS Document Filed 12/07/15 Page 57 of 68 EXHIBIT 9 REDACTED A055

104 Case 1:13-cv MMS Document Filed 12/07/15 Page 58 of 68 EXHIBIT 10 A068

105 Case 1:13-cv MMS Document Filed 12/07/15 Page 59 of 68 U.S. Department of Justice Civil Division REK:KMD:EHosford Telephone: (202) By and U.S. Mail Vincent J. Colatriano Cooper & Kirk, PLLC 1523 New Hampshire Ave. NW Washington, D.C (202) Washington, DC September 1, 2015 Re: Fairholme Funds, Inc. et al., v. United States, No C (Fed. Cl.) Dear Mr. Colatriano, We write in response to your August 12, and the attached list of privilege log entries reflecting documents, dated August 7 to August 13, 2012 (August 7-13, 2012 List). Although our privilege justifications satisfy the requirements of Rule 26 of the Rules of this Court, we believe that the following information addresses the concerns expressed in your and should obviate the need for motion practice concerning the entries identified on the August 7-13, 2012 List. This response, however, should not be construed as a template for addressing questions plaintiffs may have with respect to other entries on our privilege log. The documents on the August 7-13, 2012 List are s and/or attachments that fall into one of the categories listed below. I. Draft Versions Of Final Documents A. Drafts Of The August 17, 2012 Press Release The nineteen documents identified below are drafts in or MS Word format of the August 17, 2012 press release that announced the execution of the Third Amendment. These documents contain predecisional deliberations and are protected from disclosure by the deliberative process privilege. You have the final version of the press release. See Fairholme Compl. 11. UST UST UST UST UST UST UST UST UST UST A069

106 Case 1:13-cv MMS Document Filed 12/07/15 Page 60 of UST UST UST UST UST UST UST UST UST B. Briefing Materials Prepared For The Secretary In Advance Of Treasury Meetings With Fannie Mae and Freddie Mac Executives The thirteen documents identified below are drafts of briefing materials prepared for the Secretary in advance of planned meetings with Fannie Mae and Freddie Mac executives. These briefing materials include: a briefing memorandum; a summary review of the proposed changes to the PSPAs; and a list of anticipated questions from Fannie Mae and Freddie Mac executives along with proposed answers. The drafts contain predecisional deliberations concerning proposed modifications to the PSPAs and are protected from disclosure by the deliberative process privilege. The final briefing materials were produced at UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST C. Discussions Of And Drafts Of Q&As Regarding The Third Amendment Sixty-nine documents on the August 7-13, 2012 List identified below reflect the preparation of a list of questions and answers (Q&As) regarding the Third Amendment to the PSPAs. These documents are s discussing the Q&As or drafts of the Q&A document. They contain predecisional deliberations and are protected from disclosure by the deliberative process privilege. We will produce the final version of the Q&A document, which was logged as UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST A070

107 Case 1:13-cv MMS Document Filed 12/07/15 Page 61 of UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST II. Documents Discussing Proposed Modifications To The PSPAs A. Proposed Modification To The Transfer Of Assets Covenant The following ten documents are s that contain predecisional deliberations concerning proposed modifications to Section 5.4 of the PSPAs (Relating to Transfer of Assets) and are, thus, protected from disclosure by the deliberative process privilege. UST UST UST UST UST UST UST UST UST UST B. July 22, 2012 Attachment Discussing Key Points Regarding Proposed Modifications To The PSPAs One document on the August 7-13, 2012 List, identified as UST , is an attachment to an , dated July 22, 2012, concerning key points regarding proposed modifications to the PSPAs. The cover , produced as UST , indicates that the attachment reflects the collective thoughts of certain Treasury officials concerning reasons for amending the PSPAs. The document contains predecisional deliberations and is protected from disclosure by the deliberative process privilege. III. Documents Protected By Both The Attorney Client And Deliberative Process Privileges A. Chain Concerning Action Memorandum for Secretary One document on the August 7-13, 2012 List, identified as UST , is an chain concerning a draft action memorandum prepared for the Secretary in connection with A071

108 Case 1:13-cv MMS Document Filed 12/07/15 Page 62 of proposed modifications to the PSPAs. The s contain predecisional deliberations and reflect requests for and the provision of legal advice by Peter Bieger, Treasury s Assistant General Counsel for Banking and Finance. They are protected from disclosure by the attorney client and deliberative process privileges. B. Chains Concerning An August 8, 2012 Presentation Prepared For OMB The August 7-13, 2012 List identifies four communications that reflect requests for and the provision of legal advice by Chris Weideman, who was at the time Treasury s Deputy General Counsel, and Mr. Bieger, regarding an August 8, 2012 presentation prepared for the Office of Management and Budget. UST UST UST UST The communications sent to and from Mr. Weideman and Mr. Bieger contain both legal advice and predecisional deliberations regarding the August 8, 2012 presentation. They are protected from disclosure by the attorney client and deliberative process privileges. We note, however, that a copy of the final August 8, 2012 presentation is included in the district court administrative record. See AR 3896 (Treasury s Capital Support For The GSEs Summary Review and Key Considerations). IV. Documents The Government Will Produce A. August 8, 2012 Presentation The August 7-13, 2012 List identifies two copies of the presentation, dated August 8, 2012, referenced above. See AR These documents are marked Pre-Decisional, Market- Sensitive, but they appear to be identical copies of the final presentation that was released as part of the administrative record and, as such, we will produce these documents. UST UST UST In addition, we will produce UST , which attaches a copy of the August 8, 2012 presentation and does not otherwise contain pre-decisional deliberations. B. July 2012 Presentation The August 7-13, 2012 List identifies UST , which is a copy of a presentation, dated July 2012, and titled Illustrative Financial Forecasts - Fannie Mae Base Case & Stress Scenarios, that was included in the administrative record. See AR Although this presentation is marked Market Sensitive and Pre-Decisional, we have compared it to the presentation included in the administrative record and it appears to be identical. Accordingly, we will produce this document. A072

109 Case 1:13-cv MMS Document Filed 12/07/15 Page 63 of Moreover, we will produce two documents identified on the August 7-13, 2012 List, which are spreadsheets that were included on slides in the July 2012 presentation at AR UST UST C. Procedural Checklists Fifteen documents on the August 7-13, 2012 List are internal checklists, contained in s and attachments, detailing the process prior to executing the Third Amendment on August 17, We have reconsidered our assertions of privilege, and we will produce the checklists and redact material in the s that is protected from disclosure by the deliberative process privilege. UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST In addition to the checklists, the August 7-13, 2012 List identifies fifteen communications concerning certain steps of the process prior to executing the Third Amendment, such as obtaining approval from OMB and reaching out to SEC. One in the chain reflects a conversation with Mr. Bieger and Mr. Weideman. Because these communications reflect both predecisional deliberations and legal advice regarding the Third Amendment as well as nondeliberative material, we will produce the following documents with the privileged material redacted: UST UST UST UST UST UST UST UST UST UST UST UST UST UST UST A073

110 Case 1:13-cv MMS Document Filed 12/07/15 Page 64 of D. Draft Responses To Questions From Marketwatch The August 7-13, 2012 List identifies two documents that reflect comments to draft answers to questions from Marketwatch. It appears that the substance of the documents has been communicated publicly and, as such, we will produce the following and attachment: UST UST E. Capital Reserve Amount Powerpoint Slide The August 7-13, 2012 List identifies one document comprised of two Powerpoint slides. UST The first slide contains factual information obtained from quarterly and annual financial statements from the GSEs; the second slide reflects predecisional deliberations concerning various scenarios regarding capital reserve amount proposals under consideration prior to the execution of the Third Amendment. Accordingly, we will produce the first slide and redact the second slide because it is protected from disclosure by the deliberative process privilege. * * * In addition to the topics above, as discussed on our August 21, 2015 phone call, we will produce Federal Housing Finance Oversight Board meeting minutes under separate cover. Please let me know if you have additional questions or comments. Very truly yours, /s/ Elizabeth Hosford Elizabeth Hosford Assistant Director Commercial Litigation Branch A074

111 Case 1:13-cv MMS Document Filed 12/07/15 Page 65 of 68 EXHIBIT 11 REDACTED A075

112 Case 1:13-cv MMS Document Filed 12/07/15 Page 66 of 68 EXHIBIT 12 REDACTED A079

113 Case 1:13-cv MMS Document Filed 12/07/15 Page 67 of 68 EXHIBIT 13 REDACTED A089

114 Case 1:13-cv MMS Document Filed 12/07/15 Page 68 of 68 EXHIBIT 14 REDACTED A093

115 Case 1:13-cv MMS Document Filed 12/07/15 Page 1 of 22 APPENDIX Volume 2

116 Case 1:13-cv MMS Document Filed 12/07/15 Page 2 of 22 Exhibit 15: Exhibit 16: Exhibit 17: Exhibit 18: Exhibit 19: Exhibit 20: APPENDIX VOLUME 2 TABLE OF CONTENTS UST A102 UST A139 UST A143 UST A145 UST A147 Transcript of Deposition of Edward DeMarco (May 7, 2015)... A149 Exhibit 21: Discovery Order No. 6, Starr Int l Co. v. United States, No C (Fed. Cl. Nov. 6, 2013), ECF No A157

117 Case 1:13-cv MMS Document Filed 12/07/15 Page 3 of 22 EXHIBIT 15 REDACTED A102

118 Case 1:13-cv MMS Document Filed 12/07/15 Page 4 of 22 EXHIBIT 16 REDACTED A139

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124 Case 1:13-cv MMS Document Filed 12/07/15 Page 10 of 22 Case 1:11-cv TCW Document 182 Filed 11/06/13 Page 1 of 13 In the United States Court of Federal Claims No C (Filed: November 6, 2013) *************************************** STARR INTERNATIONAL COMPANY, * INC., on its behalf and on behalf of a class of * others similarly situated, * * * Plaintiff, * * v. * * THE UNITED STATES, * * Defendant. * * *************************************** DISCOVERY ORDER NO. 6 On October 16-17, 2013, pursuant to special procedures adopted in this case, Plaintiff Starr International Company, Inc. ( Starr ) and the United States filed two joint status reports ( JSRs ) raising discovery issues to be resolved by the Court. Starr also filed a similar JSR with non-party Federal Reserve Bank of New York ( FRBNY ) on October 16, 2013 raising discovery disputes between those two entities. Relatedly, Starr filed a motion to compel on September 11, 2013 arguing that the Government had waived the attorney-client and deliberative process privileges to the extent that the Government has put its knowledge of the legality of its own actions at issue. This discovery order addresses all remaining discovery disputes raised in the JSRs as well as Starr s motion to compel, except that Starr s motion to strike Defendant s affirmative defenses will be covered in a separate order. According to an October 25, 2013 submission from Defendant (Dkt. No. 177), the Government has withheld or redacted during discovery approximately 9,000 documents under claims of the attorney-client privilege and over 2,600 documents based on the deliberative process privilege. Given this volume of withheld or redacted documents, the Court cannot make document-by-document privilege determinations, and the parties have not requested such determinations. Instead, the Court is providing guidance on the A158

125 Case 1:13-cv MMS Document Filed 12/07/15 Page 11 of 22 Case 1:11-cv TCW Document 182 Filed 11/06/13 Page 2 of 13 disputes raised by the parties with the intention that the parties will be able to reach agreement on most disputed documents and minimize or eliminate the need for in camera review. I. The Government s Assertion of the Attorney-Client Privilege A. The Government Waived the Attorney-Client Privilege to the Extent that it Has Raised the Legality of its Actions as an Affirmative Defense. Starr seeks to compel disclosure of documents under the at-issue implied waiver that was first articulated in Hearn v. Rhay, 68 F.R.D. 574, 581 (E.D. Wash. 1975), and applied in several decisions of our Court. See Eden Isle Marina, Inc. v. United States, 89 Fed. Cl. 480, (2009); Blue Lake Forest Prods., Inc. v. United States, 75 Fed. Cl. 779, (2007). Under this doctrine, an implied waiver of the attorney-client privilege occurs when: (1) assertion of the privilege was the result of some affirmative act; (2) through this affirmative act, the asserting party put the protected information at issue by making it relevant to the case; and (3) application of the privilege would deny the opposing party access to information vital to his claim or defense. Hearn, 68 F.R.D. at 581. Here, the Hearn test has been met. The Government took an affirmative act when it raised the following defense: At the time the FRBNY entered into a contractual rescue of AIG, the FRBNY, the Board of Governors of the Federal Reserve System, and the Department of the Treasury (collectively referenced for purposes of pleading defenses as Financing Entities ) did not believe that the terms of AIG s rescue constituted a taking of property without just compensation or an illegal exaction. Answer 241. By choosing to put the Government s knowledge of its own authority under Section 13(3) of the Federal Reserve Act 1 at issue, questions of the Government s intent and understanding of the scope of its authority to enter into the loan commitment are directly relevant to this litigation. Such information is important to Starr s claim, and Starr must be allowed to examine the privileged communications to assess the validity of the Government s defense. Accordingly, the Government has waived the attorney-client privilege as to communications that discuss the Government s authority under the Federal Reserve Act to rescue AIG under Section 13(3). The Government must produce documents relating to its intent or understanding of its authority to bail out and take equity in AIG. This 1 12 U.S.C. 343 (amended 2010). 2 A159

126 Case 1:13-cv MMS Document Filed 12/07/15 Page 12 of 22 Case 1:11-cv TCW Document 182 Filed 11/06/13 Page 3 of 13 includes: (1) the Government s knowledge of its authority to take 79.9% equity in AIG; (2) the Government s knowledge of its authority to propound the Term Sheet and Credit Agreement, including any discussion of whether the Government could receive equity; and (3) discussion about the provisions related to the equity interest in the Term Sheet and Credit Agreement. This finding does not amount to a blanket waiver of the attorney-client privilege covering all communications. The Court recognizes that there are communications made for the purpose of obtaining legal advice on relevant issues other than the Government s authority under Section 13(3). The following sections provide guidance on the remaining attorney-client and work product privilege disputes between the parties. B. The Government Properly Asserted the Attorney-Client Privilege as to Draft Talking Points and Draft Questions and Answers. The Government has withheld communications with lawyers concerning draft talking points, draft press releases, draft questions and answers ( Q&As ), and draft responses to press inquiries. Starr argues that the Government waived the attorney-client privilege over such documents when it failed to assert the privilege in a separate proceeding, Fox News Network, LLC v. United States Department of the Treasury, 739 F. Supp. 2d 515, 542 (S.D.N.Y. 2010). In Fox News, the plaintiff sought records from the Government under the Freedom of Information Act, 5 U.S.C. 552 ( FOIA ) related to the intervention of the federal Government in 2008 to prevent the impending financial collapse of AIG and Citigroup, Inc. Id. The district court determined that three specific s were not covered by the deliberative process privilege and ordered that the s be produced. The Government determined that these s did not contain legal advice, and so the Government did not invoke the attorney-client privilege. The fact that those particular s did not contain legal advice does not mean that the Government cannot assert the attorney-client privilege for similar s that do contain legal advice. Such draft talking points and draft Q&As are like any other communication, and are protected by the attorney-client privilege if the documents seek, reflect, or are made for the purpose of requesting or providing legal advice. See, e.g., Chevron U.S.A., Inc. v. United States, 83 Fed. Cl. 313, App x (2008). Therefore, the Court finds that the attorney-client privilege was properly applied to such communications as Ex. 12, Entry 4946 (communication between FRBNY Chief of Staff and Treasury advisor reflecting legal advice concerning draft press release on transaction structure ) unless otherwise waived. C. The Common Interest Doctrine Covers Communications among Treasury, Board of Governors, and FRBNY Counsel and Employees. The common interest doctrine is an exception to the general rule that the attorneyclient privilege does not apply to communications that are made to or in the presence of third parties. The common interest doctrine has the effect of widening the circle of 3 A160

127 Case 1:13-cv MMS Document Filed 12/07/15 Page 13 of 22 Case 1:11-cv TCW Document 182 Filed 11/06/13 Page 4 of 13 persons to whom clients may disclose privileged information. However, the doctrine is limited to persons or entities that share a common legal interest. In re Regents of Univ. of California, 101 F.3d 1386, 1389 (Fed. Cir. 1996) (recognizing the protection of communications among persons or corporations allied in a common legal cause). The doctrine does not cover persons or entities that merely share a common economic, financial, or commercial interest. Duplan Corp. v. Deering Milliken, 397 F.Supp. 1146, 1164 (D.S.C. 1974) (common interest exists among persons where they have an identical legal interest with respect to the subject matter of a communication between an attorney and a client concerning legal advice). Here, the Government asserts that communications among Treasury, the Board of Governors, and FRBNY fall under the common interest doctrine. Starr maintains that the interest was purely commercial and so the doctrine does not apply. The Court however finds that these entities shared a common legal interest. The Government s rescue of AIG involved several complex transactions over a multiyear period, and these entities shared many legal interests over that time including the legal goal of utilizing statutory authority to stabilize the economy. The court in Fox News reached the same conclusion when it found that Treasury and FRBNY shared a common legal interest based on their coordinated legal strategy. Fox News, 739 F. Supp. 2d at 563. As a result, the Court finds that the common interest doctrine applies to communications among Treasury, the Board of Governors, and FRBNY. For instance, documents such as Ex. 32 (FRB (communication between Board counsel and Treasury counsel containing legal advice regarding Treasury actions in restructuring aid to AIG ) will be privileged unless waived on other grounds. D. The Attorney-Client Privilege is Waived for Documents Disclosed to Congressional or Investigative Panels. The next issue is whether the Government waived the attorney-client privilege with respect to documents it produced to Congress under a subpoena, given that the Government did not at that time contest the disclosure by invoking the attorney-client privilege. Starr contends that permitting the Government to invoke the attorney-client privilege to prevent disclosure here would amount to permitting a selective waiver. The Court agrees. A party waives the attorney-client privilege for any document it has voluntarily produced to a third party. Genetech, Inc. v. United States Intern. Trade Com n, 122 F.3d 1409, 1416 (Fed. Cir. 1997). Once waived, the privilege is generally lost for all purposes and in all forums. Id. at This Court has previously held that a federal agency s voluntary submission of allegedly privileged material to Congress, even when required by law, waives the attorney-client privilege with respect to all attorney-client communications concerning the same subject that were exchanged prior to those submissions. First Heights Bank, FSB v. United States, 46 Fed. Cl. 312, 319 (2000). 4 A161

128 Case 1:13-cv MMS Document Filed 12/07/15 Page 14 of 22 Case 1:11-cv TCW Document 182 Filed 11/06/13 Page 5 of 13 Whether the Government is under a subpoena, as here, or a statutory requirement, as in First Heights, the Government cannot assert attorney-client privilege over documents it has voluntarily submitted to Congress. The submissions at issue here were voluntary because the Government could have invoked the attorney-client privilege to contest the subpoena, but did not. Further, the Government could have redacted its submissions to protect the confidentiality of the attorney-client communications, but did not. The Government therefore waived the attorney-client privilege with respect to those communications. Thus, all documents on the Government s August 30, 2013 Congressional Oversight Panel Privilege Log, as well as any other withheld or redacted documents provided to Congressional investigators or the Financial Crisis Inquiry Commission must be produced. E. Sharing Privileged Communications with Consultants Did Not Waive the Attorney-Client Privilege. Some confidential communications exchanged between a third-party Government consultant and the Government are entitled to the protection of the attorney-client privilege. Id. Importantly, the attorney-client privilege protects only those communications that are indispensable to the provision of legal counsel. Id. at (quoting Louisiana Municipal Police Employees Retirement Sys. v. Sealed Air Corp., 253 F.R.D. 300, 312 (D.N.J. 2008)). Such confidential communications, even those between a sub-consultant and a Government consultant, are considered intra-agency communications and thus subject to the attorney-client privilege. See Fox News, 739 F. Supp. 2d at 540 (citing Tigue v. United States Dept. of Justice, 312 F.3d 70, 80 (2d Cir. 2002)). Therefore, unless otherwise waived, the attorney-client privilege protects from disclosure those communications with Government consultants made for the purpose of providing legal services. While the attorney-client privilege attaches to certain confidential communications between the Government and its consultants and sub-consultants, it is necessary to determine whether in this case there was such a relationship and, if so, when the relationship was established. With respect to Morgan Stanley, Starr and the Government disagree as to when, if at all, the working relationship triggering the attorney-client privilege was established. Emphasizing the formalities of privity, Starr contends that the relationship could not have been established until October 16, 2008, when Morgan Stanley and FRBNY entered into a formal retainer agreement. The Government counters that the relationship was initiated in September 2008 when Morgan Stanley was on site at AIG... to inform Treasury officials about AIG s situation. Fox News, 739 F. Supp 2d at 552. In this capacity, Morgan Stanley functioned as a consultant to FRBNY, which, in turn, functioned as a consultant to the Treasury. Id. at 540 & n.5. The Court agrees that formal privity is not a precondition for the protection of the attorney-client privilege. [W]hat matters is the nature of the relationships between the consultant and the agency, not the formalities observed. Nat l Inst. of Military Justice v. U.S. Dep t of 5 A162

129 Case 1:13-cv MMS Document Filed 12/07/15 Page 15 of 22 Case 1:11-cv TCW Document 182 Filed 11/06/13 Page 6 of 13 Def., 512 F.3d 677, 687 (D.C. Cir. 2008). As the Supreme Court held in Klamath, the consultant corollary is intended to protect communications in which the Government consultant functions just as an employee would be expected to do. Dep't of Interior v. Klamath Water Users Protective Ass n, 532 U.S. 1, 11 (2001). Accordingly, the attorney-client privilege covers communications between Morgan Stanley and the Government in which Morgan Stanley functioned as a consultant for the purpose of enabling the provision of legal advice. Starr asserts that the Government overreached in its interpretation of the scope of the attorney-client privilege as it pertains to communications involving Government consultants, particularly Morgan Stanley. On this subject, the Court is mindful that of the five documents Starr enumerated as not falling within the attorney-client privilege, the Government conceded that all five were not privileged. It therefore bears repeating that the attorney-client privilege protects no more than those third-party communications identified by the Government involving the requesting or receiving of legal advice. II. The Government s Assertion of the Deliberative Process Privilege A. The Deliberative Process Privilege is Unavailable to the Extent that the Government s Decision-Making Process and Intent is the Subject of the Litigation. The deliberative process privilege is a shield which the executive branch may use to deflect public scrutiny away from its internal decision making process. The privilege encourages candid discussions of policy options within Government agencies and protects against the premature disclosure of proposed policies. NLRB v. Sears, Roebuck & Co., 421 U.S. 132, 151 (1975). However, the deliberative process privilege is unavailable to the Government when a plaintiff s cause of action is directed at an agency s subjective motivation. In re Subpoena Duces Tecum Served on Office of Comptroller of Currency, 156 F.3d 1279 (D.C. Cir. 1998). Here, the Government s decision-making process and intent is the subject of the litigation. Starr s taking and illegal exaction claims are based on a theory that the Government coerced AIG into accepting the terms of the bailout. Starr further alleges that the Government did not have the legal authority to take an equity stake in AIG. The Government responds to Starr s allegations by raising the affirmative defense that the Government did not believe that the terms of AIG s rescue constituted a taking of property without just compensation or an illegal exaction. Thus, the theory of Starr s claim, and the affirmative defense raised by the Government, places at issue the knowledge of the relevant Government representatives and precisely what was discussed among them concerning the legality of the AIG bailout. When a plaintiff s cause of action is directed at the Government s intent, as it is here, the Government cannot use the privilege as a shield. 6 A163

130 Case 1:13-cv MMS Document Filed 12/07/15 Page 16 of 22 Case 1:11-cv TCW Document 182 Filed 11/06/13 Page 7 of 13 Accordingly, the Court finds that the Government has waived the deliberative process privilege over deliberations that address the following topics: (1) the scope of the Government s authority to make the loan commitment to AIG; (2) the Government s authority to demand equity as a condition to the loan as embodied in the Term Sheet and Credit Agreement; (3) changes to the Government s understanding of its authority under Section 13(3); and (4) discussions on whether the Government intended for the terms of the bailout to be punitive. This conclusion does not amount to a blanket waiver of the deliberative-process privilege over all communications. Indeed, courts have declined to find a blanket waiver of the deliberative process privilege even in cases where the Government s intent is relevant. See, e.g., First Heights Bank, FSB v. United States, 46 Fed. Cl. 312, 321 (2000) (citing Zenith Radio Corp. v. United States, 764 F.2d 1577, 1580 (Fed.Cir.1985)). Even though the Government has waived the deliberative process privilege for topics 1-4 above, it may still assert the privilege for Government decision-making documents that are collateral to Starr s claim. In re Subpoena Duces Tecum, 156 F.3d at 1279 (recognizing that the privilege is not defeated when the governmental decision-making is collateral to the plaintiffs suit). Since the Government can still raise the privilege over collateral deliberations, the Court s findings in Section II.A above may not resolve all outstanding discovery disputes. Accordingly, the following sections will provide further guidance on the outstanding disputes relating to the deliberative process privilege. B. The Government has Provided Sufficient Detail in the Privilege Log. The Government has the burden to prove for each document or redaction that the deliberative process privilege applies. Vaughn v. Rosen, 523 F.2d 1136, (D.C. Cir. 1975). In order to meet the requirements of Vaughn, the withholding party must provide a log with descriptions of withheld documents, so that a court and the challenging party have a measure of access without exposing the withheld information. Elec. Frontier Found. v. U.S. Dep't of Justice, 826 F. Supp. 2d 157, 164 (D.D.C. 2011). Furthermore, RCFC 26(b)(5)(A) requires that the log must describe the nature of the documents, communications, or tangible things not produced or disclosed and do so in a manner that, without revealing information itself privileged or protected, will enable other parties to assess the claim. The Court finds that this standard has been met here. Starr argues that the Government s assertions of the deliberative process privilege in the privilege log lack sufficient detail. There is no set formula for such a log. Rather, it is the function, not the form, that is important. Vaughn v. United States, 936 F.2d 862, 867 (6th Cir. 1991). Here, the Government has provided a privilege log along with a declaration from the Treasury Department s Executive Secretary, Rebecca Ewing ( Ewing Declaration ) and an accompanying appendix. When read in conjunction with 7 A164

131 Case 1:13-cv MMS Document Filed 12/07/15 Page 17 of 22 Case 1:11-cv TCW Document 182 Filed 11/06/13 Page 8 of 13 the Ewing Declaration, the appendix connects logged documents to policy decisions. The Court finds that taken together, these documents provide sufficient detail (the date, source, recipient, subject matter and nature of each document) to permit Starr to argue effectively against the privilege, and for the Court to assess the applicability of the privilege. Starr also alleges that the Ewing Declaration was untimely because it was not provided along with the first document productions. The fact that the Ewing Declaration was produced after the first privilege log is not enough to defeat the Government s claim of the deliberative process privilege. Pac. Gas & Elec. Co. v. United States, 71 Fed. Cl. 205, (2006) (holding that the privilege was supported by an affidavit executed after the documents had been identified and withheld). Starr also claims that the Government failed to meet its burden of establishing what deliberative process is involved, and the role played by the documents at issue in the course of that process. This criticism is not valid. This Court has held that the agency invoking the privilege over a document does not need to identify a specific policy decision for which a document was prepared. Dairyland Power Co-op. v. United States, 77 Fed. Cl. 330, 337 (2007). See also, NLRB v. Sears, Roebuck & Co., 421 U.S. 132, 153 n. 18, (1975) ( Agencies are, and properly should be, engaged in a continuing process of examining their policies; this process will generate memoranda containing recommendations which do not ripen into agency decisions; and the lower courts should be wary of interfering with this process. ). For these reasons, the Court finds that the Government s privilege log is sufficient. C. The Government May Only Assert the Deliberative Process Privilege where the Strict Requirements for the Assertion of the Privilege have been Met. To invoke the deliberative process privilege, the Government must first meet two prerequisites the communication it seeks to protect must be (1) predecisional and (2) deliberative. Jordan v. U.S. Dept. of Justice, 591 F.2d 753, 774 (D.C. Cir. 1978). Material is pre-decisional if it addresses activities antecedent to the adoption of an agency policy, and material is deliberative if it addresses a direct part of the deliberative process in that it makes recommendations or expresses opinions on legal or policy matters. Walsky Constr. Co. v. United States, 20 Cl. Ct. 317, 320 (1990). The information contained in the privilege logs suggests that the Government has invoked this privilege over documents that do not meet the strict requirements. For instance, the Government has asserted the deliberative process privilege for a chronology of events drafted as an aide-memoire for former Treasury Secretary Timothy Geithner s forthcoming book about the financial crisis. Such a timeline is not protected by the privilege because it is not a pre-decisional document, nor is it part of the give-and-take of 8 A165

132 Case 1:13-cv MMS Document Filed 12/07/15 Page 18 of 22 Case 1:11-cv TCW Document 182 Filed 11/06/13 Page 9 of 13 the deliberative process. Vaughn, 523 F.2d at The Government cannot invoke the privilege for documents that fail to meet the privilege s strict requirements. The Government has also invoked the deliberative process privilege for a number of draft press releases. Ultimately, such privilege determinations need to be made on a document-by-document basis, but it strikes the Court that the Government may have been overbroad in its privilege designations. Such documents are only properly withheld if their release would reveal the status of internal deliberations on substantive policy matters. Fox News, 739 F. Supp. 2d at 545. The Government suggests that all draft press releases are pre-decisional because the drafts are created prior to the issuance of an official press release. However, edits to garden-variety press releases do not qualify as deliberations because the question of how to communicate the Government s policies is not itself a policy decision. Likewise, communications regarding how to present agency policies to Congress or the Government Accountability Office ( GAO ) typically do not relate to the type of substantive policy decisions Congress intended to enhance through frank discussion. Id. The Government should only invoke the privilege for deliberations on substantive policy decisions. Id. For instance, in Fox News the court found that a draft of a press release was properly privileged when its release would reveal how Treasury s deliberations with respect to the underlying substantive policy progressed over the course of several days. Id. Only documents containing deliberations on substantive policy decisions may be privileged, and any others must be released in full. D. The Government s Communications Involved Policy Considerations. Starr argues that predecisional deliberations about the AIG bailout involved commercial issues and were not policy considerations worthy of the deliberative process privilege. But the bailout of AIG was not a commonplace commercial transaction. Excerpts from the Ewing Declaration confirm that the Government s transaction with AIG contained commercial elements, but also that this transaction took place amid a vigorous policy debate surrounding the Government s response to an historic financial crisis. The Court therefore agrees with the finding in Fox News that [a]lthough decisions about the terms of a financial transaction may not be typical of those made by a federal agency, the decisions that Treasury made regarding the use of TARP monies are clearly policy decisions. Fox News, 739 F. Supp. 2d at 542. Thus, the fact that these transactions had a commercial element does not mean that the privilege is waived. Nonetheless, the Court believes that many of the deliberations about the details of the AIG bailout likely touch on the topics listed in Section II.A above and would be subject to a waiver. 9 A166

133 Case 1:13-cv MMS Document Filed 12/07/15 Page 19 of 22 Case 1:11-cv TCW Document 182 Filed 11/06/13 Page 10 of 13 E. The Public Scrutiny of the Government s Decision to Rescue AIG does not Negate the Deliberative Process Privilege. Starr also claims that the Government s invocation of the deliberative process privilege is unrealistic given the intense public scrutiny to which the Government s decisions and conduct at issue in this case have been subjected. It is true that the Government s decision to rescue AIG has received significant public attention. Government officials have testified before Congress, given speeches, and are writing books purporting to reveal the full story about the financial crisis. Just because the public has insight into some deliberations does not result in a blanket waiver of the deliberative process privilege. As the Government rightly notes, there is no subject-matter waiver associated with the deliberative process privilege. Ford Motor Co. v. United States, 94 Fed. Cl. 211, 218 (2010). The Government s release of a document waives the privilege only for the document specifically released, not for related materials. F. The Government must Demonstrate that it took Reasonable Steps to Protect the Privilege Over the Treasury Docs. Starr requests documents in Mr. Geithner s possession from his time as Secretary of the Treasury ( Treasury Docs ) that the United States seeks to protect from disclosure based on the deliberative process privilege. Mr. Geithner has shared the contents of the documents with the journalists assisting him on his book. Yet the deliberative process privilege belongs to the United States and not to Mr. Geithner. The question then is whether the United States took reasonable steps to protect the privilege. See United States v. de la Jara, 973 F.2d 746, 750 (9th Cir. 1992) (finding that the privilege is waived if the privilege holder failed to make efforts reasonably designed to protect and preserve the privilege). According to the Government, the Treasury provided the Treasury Docs to Mr. Geithner pursuant to a confidentiality agreement. Based on the record before the Court, it is not clear when the Government learned that Mr. Geithner had shared the Treasury Docs with a third party, nor is it clear what steps the Government took upon learning that these documents had been disclosed. The Government will need to provide such information in order to invoke the deliberative process privilege over the Treasury Docs. G. The Deliberative Process Privilege may Apply to Government Deliberations Subsequent to the Initial Rescue of AIG. Starr asserts that the Government cannot invoke the deliberative process privilege for communications post-dating the initial September 2008 rescue of AIG. While Starr is right that the Government cannot withhold post-decisional documents that are designed to explain Government decisions that have already been made, NLRB v. Sears, Roebuck & Co., 421 U.S. 132, (1975), the Government can withhold documents created 10 A167

134 Case 1:13-cv MMS Document Filed 12/07/15 Page 20 of 22 Case 1:11-cv TCW Document 182 Filed 11/06/13 Page 11 of 13 after a decision which recount pre-decisional deliberations. Ford Motor, 94 Fed. Cl. at 223. As such, communications about pre-adoption deliberations on a proposed action are privileged unless that privilege has been waived for other purposes. Conversely, documents that simply explain decisions that have already been made must be produced to Starr. If specific documents contain communications about both pre-decisional and post-decisional deliberations, then the Government should redact the privileged material and produce the material that is not privileged. H. The Ewing Declaration s Assertions of the Deliberative Process Privilege over FRBNY Deliberations are Procedurally Sound. According to Starr, Treasury s attempt to assert the deliberative process privilege for documents generated by other entities, such as FRBNY, is procedurally defective. To invoke the deliberative process privilege, the party resisting discovery must meet several procedural requirements: first, the head of the agency that has control over the requested document must assert the privilege after personal consideration, or alternatively, the head of an agency can delegate authority to invoke the deliberative process privilege on the agency s behalf; and second, the party seeking protection must state with particularity what information is subject to the privilege. Pac. Gas & Elec. Co. v. United States, 70 Fed. Cl. 128 modified on reconsideration, 71 Fed. Cl. 205 (2006). Here, Treasury has met the basic requirements. Secretary of the Treasury Jacob Lew delegated authority to invoke the deliberative process privilege on Treasury s behalf to Executive Secretary of the Treasury Rebecca Ewing. The Ewing Declaration provides detailed criteria for claiming the deliberative process privilege. Further, Starr cites no authority for the proposition that Treasury may not invoke the deliberative process privilege over documents in Treasury s control that reflect FRBNY s internal deliberations. The Government finds support in Fox News where the district court found that Treasury could assert the privilege over documents reflecting deliberations of the Federal Reserve Board. Fox News, 739 F. Supp. 2d at 554. Thus, the Court finds that the Ewing Declaration s assertions of the deliberative process privilege over FRBNY deliberations are procedurally sound. I. The Government did Not Waive the Deliberative Process Privilege when it Shared Documents with FRBNY, but it did Waive the Privilege when It Shared the Documents with other Third Parties. The deliberative process privilege protects only inter-agency or intra-agency documents. Disclosure to a non-agency third party waives the privilege. See Klamath, 532 U.S. at 8-9. (finding that communication between an Indian Tribe and the Department of the Interior was not intra-agency). However, courts have recognized the consultant corollary to the intra-agency definition, which treats documents exchanged with agency consultants as intra-agency. In Klamath, the Supreme Court noted that 11 A168

135 Case 1:13-cv MMS Document Filed 12/07/15 Page 21 of 22 Case 1:11-cv TCW Document 182 Filed 11/06/13 Page 12 of 13 consultants may be enough like the agency s own personnel to justify calling their communications intra-agency. Id. at 3. Here, the Court agrees with the finding in Fox News that FRBNY employees functioned enough like Treasury s own personnel that communications between FRBNY and Treasury were intra-agency communications. As the court in Fox News explained, NYFRB and Treasury worked side-by-side in developing the terms of these transactions, and... the fundamental concern of both entities was stabilizing the economy. 739 F. Supp. 2d at 540. Accordingly, the deliberative process privilege protects these documents from disclosure. On the other hand, communications with Congress or communications disclosed to Congress are not protected by the deliberative process privilege because Congress is not a Government agency. Dow Jones & Co., Inc. v. Dep't of Justice, 917 F.2d 571, 574 (D.C. Cir. 1990). Likewise, communications disclosed to the GAO are not protected because the GAO is an independent agency in the legislative branch. III. The Application of the United States Waiver of Privilege to FRBNY As described in Section I.A above, the Government waived the attorney-client privilege by raising the legality of its actions as an affirmative defense. Starr further contends that this waiver extends to FRBNY. In response, FRBNY argues that the United States has no authority to waive FRBNY s attorney-client privilege because FRBNY is a separate legal entity from the United States. FRBNY and the other Federal Reserve district banks are uniquely structured to act simultaneously as public and private entities. On the one hand, the banks are authorized by statute to act as fiscal agents of the Government. See Scott v. Fed. Reserve Bank of Kansas City, 406 F.3d 532, 535 (8th Cir. 2005) (citing 12 U.S.C. 391). Moreover, any profit earned by the banks ultimately goes to the Government s purse. Id. On the other hand, the banks are independent corporations, the day-to-day commercial operations of which are overseen by a board of directors whose majority is controlled by private commercial banks sitting in their districts. Id. at In responding to the 2008 financial crisis, FRBNY was undoubtedly acting in its public capacity as an agent of the Government. An agency relationship is created when a principal authorizes an agent (a) to act on the principal s behalf, (b) subject to the principal s control, and (c) the agent consents to so act. See B & G Enterprises, Ltd. V. United States, 220 F.3d 1318 (Fed. Cir. 2000) (quoting Restatement (Second) of Agency 1(1)) accord Restatement (Third) of Agency 1.01 (2006). FRBNY executed the AIG bailout pursuant to Section 13(3) of the Federal Reserve Act. Under Section 13(3), FRBNY was required to obtain the authorization of at least five members of the Board of Governors before transacting the rescue of AIG. 12 U.S.C The Government 12 A169

136 Case 1:13-cv MMS Document Filed 12/07/15 Page 22 of 22 Case 1:11-cv TCW Document 182 Filed 11/06/13 Page 13 of 13 therefore authorized FRBNY to rescue AIG. Section 13(3) also stipulated that the terms of the transaction were subject to such limitations, restrictions, and regulations as the Board of Governors of the Federal Reserve System may prescribe. Id. Thus, FRBNY s actions were subject to the Government s control. Finally, FRBNY proceeded to act in implementing the transaction in accordance with the Government s authorization. When FRBNY acted to implement the transaction for which it had gained authorization from the Board of Governors, FRBNY acted as the agent of the United States. Due to the absence of controlling precedent, it is helpful to analogize to the principle that a corporation may unilaterally waive the attorney-client privilege with respect to any communications made by a corporate officer in his corporate capacity.... In re Grand Jury Subpoena, 274 F.3d 563, 573 (1st Cir. 2001). Accordingly, unless the attorney-client communications [do] not concern matters within the scope of the affairs of the principal, then an agent is obligated to produce attorney-client communications necessary to a judicial inquiry into the liability of the principal. Id. (quoting In re Bevill, Bresler & Shulman Asset Mgmt. Corp., 805 F.2d 120, 123 (3d Cir. 1983)) (emphasis in original). While functioning as an agent for the Government, FRBNY communicated with counsel regarding FRBNY s authority to conduct a rescue of AIG pursuant to Section 13(3) of the Federal Reserve Act. To the extent the Government now asserts that Treasury and FRBNY believed their actions were legal, the Government has waived the attorney-client privilege that would normally attach to FRBNY s communications with counsel on the subject of its authority under Section 13(3). Such an affirmative defense waives the attorney-client privilege to all... communications regarding the same subject matter. In re EchoStar Communications Corp., 448 F.3d 1294, 1301 (Fed. Cir. 2006). Furthermore, it would be manifestly unfair to Starr to allow the Government to assert this affirmative defense and to allow FRBNY to invoke the attorney-client privilege to preclude Starr from obtaining the information necessary to establish their claim. Accordingly, FRBNY must produce all communications that discuss what authority FRBNY had under the Federal Reserve Act to make the Section 13(3) loan to AIG. Using the above privilege guidelines from the Court, the parties and FRBNY should determine whether any privileged document disputes remain, and notify the Court whether any in camera review is desired. Upon receiving such a notice, the Court will issue a further order regarding the procedures for in camera review. IT IS SO ORDERED. s/ Thomas C. Wheeler THOMAS C. WHEELER Judge 13 A170

137 Case 1:13-cv MMS Document Filed 12/07/15 Page 1 of 63 APPENDIX Volume 3

138 Case 1:13-cv MMS Document Filed 12/07/15 Page 2 of 63 APPENDIX VOLUME 3 TABLE OF CONTENTS Exhibit 22: Exhibit 23: Exhibit 24: Exhibit 25: Exhibit 26: Exhibit 27: Exhibit 28: Exhibit 29: Exhibit 30: Transcript of June 19, 2014 Status Conference... A171 UST A177 UST A179 UST A181 Excerpts from D.D.C. Action Administrative Record, T-3833 through T A183 Excerpts from D.D.C. Action Administrative Record, T-3883 through T A214 FHFA, FHFA Answers to the PWG Working Group on Supervision Questionnaire (Apr. 29, 2010)... A227 FHFA A233 FHFA A236

139 Case 1:13-cv MMS Document Filed 12/07/15 Page 3 of 63 EXHIBIT 22 A171

140 Case 1:13-cv MMS Document Filed 12/07/15 Page 4 of 63 In the Matter of: Fairholme Funds, Inc., et al. v. USA June 19, 2014 Condensed Transcript with Word Index For The Record, Inc. (301) (800) A172

141 Case 1:13-cv MMS Document Filed 12/07/15 Page 5 of 63 Fairholme Funds, Inc., et al. v. USA 6/19/ THE COURT: The date of the third amendment? 2 MS. HOSFORD: Yes. 3 Moving on to the second issue that we raised in our 4 motion, we would ask that the Court limit the proposed scope 5 of discovery to the issues that were actually raised in the 6 February 26th order. And as we ve set forth in our motion 7 and in the chart that we attached to our reply, we have 8 agreed to provide documents on whether FHFA was an agent and 9 arm of the Treasury in response to requests 1, 11, 14 and But the other requests that are grouped under requests 11 relating to whether FHFA is the United States vastly exceed 12 the scope of that issue. 13 Like we are willing to produce anything that bears 14 on the relationship between the two agencies, but we are not 15 going to respond to any and all documents reflecting 16 communications between Treasury and the Justice Department, 17 which has no relevance to that issue, or documents relating 18 to whether -- FHFA s determination that it s obligated to 19 maximize Treasury s return on its investment. 20 Obviously, many of those documents are also going 21 to be privileged, but they re not even responsive to the 22 Court s order, which was a pre -- you know, the Court ordered 23 this discovery, as the Court knows, in advance of a motion to 24 dismiss. And by definition, in advance of a motion to 25 dismiss, discovery should be limited to the narrow scope of 1 the issues on which the discovery is required. This is not 2 the normal situation under Rule 26 where you -- you know, all 3 relevant documents to the case should be produced. 4 So, therefore, we ve suggested that we will respond 5 to request 1A and request 4 and for the date range of July 1 6 to December 31st, The question about whether FHFA -- I m sorry. On 8 the question of the solvency of the enterprises and 9 expectations of profitability at the time of the 10 conservatorship, we would respond to requests 1A and 4 11 because they re directly responsive to the Court s order. 12 The first one is financial projections in the possession of 13 FHFA and/or Treasury in connection with the conservatorship, 14 and the second one is documents relating to the decision to 15 leave the GSE s existing capital structure in place. That s 16 exactly what the Court ordered in the order and that s 17 exactly what we re willing to produce documents on, and 18 within a reasonable time frame, July 1st to December 31st, Now, in their opposition brief, Plaintiffs claim 21 that they had actually suggested that they were looking for 22 documents regarding the solvency of the enterprises, not only 23 in 2008, but throughout basically the conservatorships and 24 focusing on But if you read their motion for discovery 25 and the declaration attached thereto, there was no mention of any dates other than the time that the conservatorships were 2 entered into. Plaintiffs have indicated that they mentioned 3 it in their reply brief, but it did not appear in the Court s 4 order and we had no chance to respond to dates set forth the 5 first time in Plaintiffs reply brief. 6 So, on the issue of the solvency of Fannie Mae and 7 Freddie Mac, like I said, we re okay with request 1A and 8 request 4, but requests 2, 3 and 5 go far beyond that topic. 9 Two goes to the decision to compensate Treasury through percent warrants. That doesn t really go to profitability, 11 and if it does, it s satisfied by 1A. Three goes to the 12 valuation of the warrants from 2008 to As I mentioned, 13 that s not within the scope of the dates. And five, were 14 they ask about government stock dividends, that s not even 15 related to profit because the dividends were fixed at percent. 17 So, Plaintiffs are essentially trying to use this 18 pre-motion to dismiss decision discovery to get full-blown 19 discovery, and we think that is not warranted under the 20 circumstances of the case and not warranted in light of the 21 substantial harms and the statute that we -- that I made 22 reference to earlier. 23 Just getting back to the statute, again, briefly, 24 there is precedent for courts to find that discovery should 25 not be produced in reliance on 4617(f). Like I said, we re 1 not asking the Court not to exercise jurisdiction over the 2 case except in the context for a motion to dismiss, which we 3 understand is deferred. But 4617(f) is an important tool to 4 protect the conservator from the type of second guessing and 5 invasive, intrusive discovery that will have a deleterious 6 effect on its ability to manage the enterprises. 7 THE COURT: Was there anything else? 8 MS. HOSFORD: Nothing else, Your Honor. 9 THE COURT: I just have a question for you. Could 10 you please explain the litigation position or what I see as a 11 conflict with -- or an inconsistency with, on the one hand, 12 the Government are saying Plaintiffs lack standing, this 13 Court lacks jurisdiction because the conservatorship is not 14 part of the Government, it s not a Government entity. And, 15 yet, when Plaintiffs seek discovery, it s the position of the 16 United States that any documents generated by the 17 conservatorship are subject to the deliberative process 18 privilege? 19 MS. HOSFORD: Yes, Your Honor. First of all, there 20 is case law out there, and we cite it in our brief, 21 acknowledging that FHFA does enjoy the deliberative process 22 privilege even when it s acting as conservator. Even setting 23 that aside, in the context of this case, it s very important. 24 If the Court were ultimately to find that the FHFA is the 25 United States -- or is not the United States, I m sorry, and For The Record, Inc. (301) (800) A173 4 (Pages 13 to 16)

142 Case 1:13-cv MMS Document Filed 12/07/15 Page 6 of 63 Fairholme Funds, Inc., et al. v. USA 6/19/ previously they had had to disclose documents that would have 2 been subject to deliberative process privilege, we have a 3 potential waiver situation there and we have disclosure of a 4 lot of documents that can be very harmful to the agency under 5 the assumption that they are the United States when it could 6 ultimately be determined that they are not the United States. 7 So, FHFA is merely trying to protect its rights at 8 this point. Because the issue is still open, they are not 9 willing to just give up on the deliberative process 10 privilege. So, that s the situation. 11 THE COURT: No, I -- I -- okay. Thank you. 12 MS. HOSFORD: Okay. Thank you, Your Honor. 13 MR. COOPER: Good morning again, Judge Sweeney. 14 THE COURT: Good morning. 15 MR. COOPER: Your Honor, let me just preface the 16 points I plan to make in response to counsel s presentation. 17 Contrary to counsel s claim, we have attempted truly to 18 tether very tightly to this Court s February discovery order 19 and the Court s articulation of the issues that have been 20 placed in dispute by the Government, jurisdictional, ripeness 21 and reasonable expect -- investment-backed expectation 22 issues, carefully tried to tether them to those issues. And 23 we believe that every one of the requests that we ve made is 24 carefully and tightly tethered to those issues. 25 Let me first address the blanket exemptions or 1 privilege or relief that counsel seeks for producing a 2 particular range of documents, not just time-limited, but in 3 terms of subject matter. Their first point, Your Honor, is 4 that for the Courts to order this discovery, it would 5 inevitably impact and affect -- restrain and affect the 6 exercise of the powers or functions of the conservator. As 7 the Court mentioned, the provision, in and of itself on its 8 face, doesn t reach something like discovery in a lawsuit 9 brought for damages in the Court of Federal Claims. There s 10 precedent on this subject, as the Court knows, from the 11 FIRREA example which provided the precise model for this 12 provision. 13 But, Your Honor, more importantly, the language of 14 the statute itself makes clear that what is contemplated 15 there is some type of judicial order that would restrain the 16 ability -- the ability of the conservator to exercise its 17 discretionary powers and functions. There is -- it s 18 inconceivable that a discovery order could affect the ability 19 of the conservator to exercise his powers. To be sure, it s 20 conceivable that it could affect or influence how the 21 conservator exercised his discretion with respect to those 22 powers. That is conceivable. But that s not what the 23 statute is designed, by any means, to reach. 24 But the Court has cut through all of this with the 25 obvious and complete cure or protection for all of the Government s concerns, which is a protective order. And Your 2 Honor has identified and we welcome the sanction that the 3 Court has suggested and we don t need it because we re 4 officers of the court. We ve done this many, many times, as 5 has the Government. It has engaged in protective orders in 6 countless cases. Countless cases, Your Honor. 7 THE COURT: I thought it would -- I thought a bit 8 of increased security by fashioning what I mentioned a few 9 minutes ago, because of the leak that occurred in Judge 10 Wheeler s case -- we handle bid protest cases involving 11 millions and millions of dollars every day and we don t have 12 leaks. And attorneys representing a Plaintiff have direct 13 access to the opposing clients, the Defendant/Intervenor s, 14 proprietary information, information that is so sensitive it 15 could make or break a corporation and we don t have leaks. 16 But there was a leak in Judge Wheeler s case and it seemed to 17 me that instead of perhaps economics driving it, it could 18 have been either somewhat politically motivated or -- I mean, 19 I don t know. I m just speculating and judges shouldn t 20 speculate. 21 But it occurred to me that if I had this caulk in 22 place, this severe sanction looming, that when counsel is 23 tapping various associates or paralegals or whomever to 24 assist in a review of documents, the fear of God would be put 25 in that individual that there would not be a leak because it 1 will be so -- the sanction will be swift and so severe that 2 that person would lose their job and in addition to facing 3 other sanctions that I could fashion, that, you know, their 4 direct employer, Plaintiffs counsel, would come down on them 5 like a ton of bricks and that you would just emphasize the 6 importance of -- which I m sure you do in every case, but you 7 would emphasize the importance of the sanctity of that 8 protective order. 9 MR. COOPER: To be sure, Your Honor. 10 THE COURT: And I have no doubt all of the counsel 11 in this room, in front of the bar, for that matter behind the 12 bar, would never do anything to violate a protective order. 13 But in case someone on Plaintiffs side might be so 14 sympathetic for the Plaintiff that their heart would overcome 15 common sense and they would do something unprincipled, they 16 would think twice before they did it. 17 MR. COOPER: Yes, Your Honor. But, of course and, Your Honor, that is a complete protection for the 19 interest the Government has advanced and that it has 20 supported with its declarations. That interest is founded on 21 one concern. One concern. Public disclosure. Public 22 disclosure of the information that is exchanged in discovery. 23 That is what it found -- it bases its request for this 24 sweeping exemption essentially from discovery and what it 25 bases its request for these time limitations. Public For The Record, Inc. (301) (800) A174 5 (Pages 17 to 20)

143 Case 1:13-cv MMS Document Filed 12/07/15 Page 7 of 63 Fairholme Funds, Inc., et al. v. USA 6/19/ disclosure. The protective order completely protects against 2 that -- against that possibility, Your Honor. 3 Let s really just pause for a moment and consider 4 what it is the Government is claiming here. They re claiming 5 a privilege -- a sweeping and blanket privilege that flows, 6 they say, from this statutory provision that just doesn t 7 exist, one that basically says, in discovery, in a case 8 properly brought before this Court for money damages, not for 9 equitable injunction type relief, but for money damages, 10 there can be no discovery, period. It s a new privilege 11 essentially, governmental privilege that they re inventing. 12 And it, Your Honor, just doesn t exist. But even if it did, 13 it would be completely addressed by the protective order. 14 Let me move to the deliberative process privilege 15 claim that counsel makes, and it directs this claim as well 16 to the discovery requested with respect to profitability in 17 requests 1 through 5, and the requests made with respect to 18 when, whether and how the conservatorships may be terminated, 19 requests 6 through 10. I want to make two threshold points 20 on that. 21 First, there is no blanket categorical privilege 22 for deliberative process or any other privilege. Documents 23 are privileged standing in their own shoes, each document. 24 In a claim of privilege, the burden is on the party asserting 25 a privilege to establish that a document or information or, 1 you know, the answer to a deposition question, whatever it 2 may be, is privileged information. And that s true of the 3 deliberative process privilege. It s true of the executive 4 privilege. It s true of every privilege. And, so, there s 5 no blanket -- there s no blanket exemption from having to go 6 through the document-by-document process and to provide a log 7 to the other side so those claims can -- can at least, at 8 that level, be verified as being reasonable. 9 Now, the second point, Your Honor, the Court put 10 your finger on it, is that the Government, first, concedes and there s certainly no dispute between the parties here that Fannie and Freddie are private corporations. So, no 13 matter what else they may claim, they re not claiming that 14 documents in Fannie and Freddie s possession are privileged, 15 and it s obvious that they can t be. But they re going 16 farther and they re saying specifically that FHFA, as 17 conservator for Fannie and Freddie, and they say this in 18 terms, is not the United States, it is Fannie and Freddie. 19 It is as though we are seeking relief in this case and 20 seeking discovery from the management of private 21 corporations. That s their argument, Your Honor, as the 22 Court points out. 23 And, Your Honor, we ve said to be sure, no, FHFA is 24 a Government agency, this Court has got Tucker Act 25 jurisdiction over our claim against the Government for the conduct of Treasury and FHFA together in imposing the third 2 amendment, the Net Worth Sweep. And in response to their 3 claim that that s not true, of course, we asked for 4 discovery. Well, we think it s true. We think your public 5 statements essentially make that true and our discovery 6 request cites specific public documents that -- you know, 7 through our discovery requests. We give an example of a 8 public document that is of the ilk that we re requesting. 9 But, Your Honor, our point is the Government can t 10 both say our client, FHFA, is not the United States; it s not 11 an arm or an agent of Treasury; it wasn t acting for the 12 benefit of the taxpayers. All of the metrics that the Court 13 itself identified in the discovery order don t exist as a 14 matter of fact. They can t say that on the one hand and then 15 say, but we can t -- we re not going to give you the 16 information going to that issue because we re relying on a 17 uniquely government privilege that they ve just excluded 18 their client from claiming with their own position. They 19 can t do both of those THE COURT: And so far, I haven t gotten -- I 21 haven t received a good answer from the Government. Counsel 22 is very able. But counsel has expressed concern of what 23 could happen if certain documents are released, which I do 24 not want to see happen, but counsel didn t answer to my 25 satisfaction the discrepancy between sort of using the 1 deliberative process as sword and shield. On one hand, FHFA 2 is a government entity, you know, for purposes of booting the 3 Plaintiffs out of court and not part of the Government, but 4 for purposes of forwarding discovery, all of a sudden 5 deliberative process is appropriate because they are part of 6 the Government. So, it s a schizophrenic approach and I m 7 just waiting to hear a reasonable explanation. 8 MR. COOPER: Well, Your Honor, I don t think you ll 9 find one, particularly in light of the fact that, as I 10 mentioned, it is the Government s burden to establish its 11 entitlement to the privilege. And out of its own mouth, it 12 disqualifies it -- disqualifies itself from the very 13 privilege that they seek, that uniquely governmental 14 privilege not available to private parties and certainly not 15 available to the conservator if the conservator is not the 16 United States as they maintain. 17 The other thing I d like to address on this is 18 counsel s claims made in their briefing to the Court and here 19 again and emphasized here, that what we re seeking is 20 information relating to ongoing deliberations within the 21 agencies with respect to how, whether and when the 22 conservatorships will be terminated. That s THE COURT: Well, I do have a -- I do have a 24 concern about that. Here s why and why I d like to see 25 discovery in waves. I -- right now, at this juncture, we re For The Record, Inc. (301) (800) A175 6 (Pages 21 to 24)

144 Case 1:13-cv MMS Document Filed 12/07/15 Page 8 of 63 Fairholme Funds, Inc., et al. v. USA 6/19/ not here to determine whether or not a taking occurred. What 2 we are determining is whether the Plaintiffs can meet the 3 United States jurisdictional challenge, which is these -- 4 the conservators, the conservatorship, is not part of the 5 United States. It s not a government agency, excuse me. 6 It s not a government agency. Therefore, the Plaintiffs are 7 not properly before this Court because in this Court, the 8 only entity that can be sued is the United States Government. 9 MR. COOPER: Your Honor, that THE COURT: So, some of the requests seem to get 11 into merits arguments. 12 MR. COOPER: Yes. 13 THE COURT: And that concerns me because I m not 14 allowing, I think -- as the breadth of discovery that 15 Plaintiff seeks, I think, and I understand why advocates do 16 it, they re looking for too much. But I think the Government 17 is offering too little. 18 MR. COOPER: Well, Your Honor, on that point, I 19 want to -- first of all, I want to agree with the Court s 20 point, but to add this, and that s their jurisdictional 21 claim, isn t only that FHFA is not the United States; it is 22 also that this case is not ripe for your consideration. And 23 that is the claim under which they seek to shield and to 24 prevent discovery with respect to profitability, these 25 profitability projections that we have sought and they ve 1 agreed to provide, at least with respect to those narrow time 2 ranges and -- and on that, let me just go ahead and make the 3 point before I lose it, which is that they ve basically said, 4 okay, we ll give you this information, the information 5 relating to profitability projections and when, whether and 6 how the conservatorships will be terminated, we ll give you 7 that for two narrow time ranges. 8 One, the seven-and-a-half months before the third 9 amendment, that is from, I think, January 1st, 2012 to August 10 17th, 2012, when the Net Worth Sweep was adopted. Those 11 seven-and-a-half months, we ll give you that. And we ll give 12 you that information with respect to the period of time when 13 the conservatorships were put in place. And, again, their 14 claim for not giving us any of the information relating to 15 those two ripeness issues in between is -- it s not clear. 16 I m not sure what it is. 17 Because, Your Honor, how is it going to be -- how 18 do they support the proposition that this is -- what they re 19 willing to give us is deliberative process -- is not 20 deliberative process and is not a threat to the ongoing 21 management of conservatorships, but what they re not willing 22 to give us between those two dates somehow is. The only 23 possible claim has to be that it s just too burdensome, and 24 they haven t made that claim. They haven t made that 25 argument But, Your Honor, on the ripeness issue, the issue 2 here is not -- or at least let me put it this way. Counsel 3 argues emphatically that this relates to ongoing 4 deliberations within the Government, within the agencies 5 about how, whether and when the conservatorships will 6 terminate. And they say that isn t and can t be known 7 because it will be Congress that terminates those -- 8 terminates those conservatorships if and when they ever are 9 terminated. 10 Your Honor, the issue isn t before this Court, 11 isn t what decision is Congress going to make. If that were 12 the question, there would never be a ripe case before this 13 Court, because every case that is brought before this Court, 14 Congress can change it like that with legislation. It can if Congress enacted a measure that would appeal the Net Worth 16 Sweep, which they could certainly do, well, my case would be 17 transformed substantially in this courtroom. It could do 18 that. It could do any number of things. 19 But what Congress may or may not do is not the 20 question here. It s whether or not the Government has made a 21 policy decision with respect to when, whether and how the 22 conservatorships will terminate, and it clearly has, or at 23 least our point is that there s a wealth of public 24 information and statements to support the proposition that it 25 has. And in the face of their denial that it has, we re 1 entitled to discovery to bring information to this Court to 2 prove that this case is ripe. It is ripe. 3 The Government has basically made the decision -- 4 the policy decision that the Government, the FHFA, will never 5 end the conservatorships. They have said -- and they will 6 not be ended unless and until Congress does so, and they say 7 that in their papers. We anticipate, they say over and over, 8 that Congressional action will be what ultimately resolves 9 the question about Fannie and Freddie and the 10 conservatorships. 11 And, so, they ve made the decision that the 12 conservatorships will continue in kind of a state of 13 perpetual servitude, Fannie and Freddie, to the Government as 14 the Government extracts from Fannie and Freddie all of their 15 earnings and the OMB, and a document attached to our appendix 16 projects profitability projection. And by the way, I asked 17 my colleagues to find out how many public reports the 18 Government, FHFA, Treasury, OMB have published that include 19 projections of the profitability of the future financial 20 performance of Fannie and Freddie. We ve been able to come 21 up with 83. That s that stack right there, are public 22 profitability reports, Your Honor. 23 The notion that information with respect to 24 profitability is so sensitive is difficult to take in the 25 light of that. But For The Record, Inc. (301) (800) A176 7 (Pages 25 to 28)

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