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THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA In re Federal National Mortgage Association Securities, Derivative and ERISA Litigation In re Fannie Mae Securities Litigation | | | | | | | | MDL No. 1668

Consolidated Civil Action No. 1:04-cv-01639 Judge Richard J. Leon

MOTION OF THE FEDERAL HOUSING FINANCE AGENCY FOR A PROTECTIVE ORDER Intervenor, the Federal Housing Finance Agency (the FHFA), respectfully moves for a protective order to prevent the public disclosure of certain documents. As explained in more detail in the accompanying Memorandum of Points and Authorities, the documents the parties seek to publicize should be protected because disclosure of the documents would damage the ongoing communications the FHFA has both internally and with its regulated entities. In this historic housing crisis, ensuring that these communications are fulsome and candid has perhaps never been more important. Many of the documents should also be protected because Congress has accorded them protection under the Privacy Act and other statutes. Furthermore, the disclosure of some of those documents would have an undue chilling effect on law enforcement investigations conducted by inspectors general throughout the government while serving only to harass and embarrass current and former Agency employees. Even though the contested documents may ultimately prove to be completely irrelevant, the FHFAs motion does not affect the parties ability to use the documents in this litigation. To prevail in this motion, the FHFA need only show good cause why the documents should not be released publicly now. See Fed. R. Civ. P. 5.2(e), 26(c). Given the weight of the Governmental interests involved, the lack of any evidentiary value associated with the documents, and the fact

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that the documents can be used subject to the already existing protective order, the FHFA has met that burden. A proposed ordered is attached.

Dated: February 9, 2012

Respectfully submitted, /s/ Joseph J. Aronica Joseph J. Aronica DUANE MORRIS LLP 505 9th Street N.W., Suite 1000 Washington, DC 20004 Phone: (202) 776-7824 Fax: (202) 478-1885 Stephen E. Hart FEDERAL HOUSING FINANCE AGENCY 1700 G Street, N.W. Washington, DC 20552 Phone: (202) 414-3800 Fax: (202) 414-6504 Attorneys for the Federal Housing Finance Agency

ii

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THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA In re Federal National Mortgage Association Securities, Derivative and ERISA Litigation In re Fannie Mae Securities Litigation | | | | | | | | MDL No. 1668

Consolidated Civil Action No. 1:04-cv-01639 Judge Richard J. Leon

MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION OF THE FEDERAL HOUSING FINANCE AGENCY FOR A PROTECTIVE ORDER

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TABLE OF CONTENTS Page MOTION OF THE FEDERAL HOUSING FINANCE AGENCY FOR A PROTECTIVE ORDER ................................................................................................................................ i MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION OF THE FEDERAL HOUSING FINANCE AGENCY FOR A PROTECTIVE ORDER ................................................................................................................................1 TABLE OF CONTENTS.................................................................................................................2 I. II. III. INTRODUCTION ...............................................................................................................5 FACTUAL BACKGROUND ..............................................................................................7 ARGUMENT .......................................................................................................................9 A. B. C. D. E. IV. Standard. ................................................................................................................. 9 The Agencys Deliberative Processes Would Be Harmed By Disclosure. ........... 11 The Agencys Examination Process Would Be Harmed By Disclosure. ............. 12 The Policy Underlying the Privacy Act Weighs In Favor Of The Protective Order. ................................................................................................... 13 Each Document Warrants Protection. ................................................................... 15

CONCLUSION ..................................................................................................................25

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TABLE OF AUTHORITIES

United States Supreme Court Cases NLRB v. Sears, Roebuck & Co., 421 U.S. 132, 95 S. Ct. 1504, 44 L. Ed. 2d 29 (1975) .............................................................................................................11, 12 Seattle Times Co. v. Rhinehart, 467 U.S. 20, 104 S. Ct. 2199, 92 L. Ed. 2d 17 (1984) ...............................................................................................................9, 10

United States Court of Appeals Cases Dow Jones & Co. v. U.S. Dep't of Justice, 917 F.2d 573 (D.C. Cir. 1990) ...................................11 EEOC v. Natl Childrens Ctr., Inc., 98 F.3d 1406 (D.C. Cir. 1996) ............................................10 In re Subpoena Served Upon the Comptroller of the Currency, and the Secretary of the Board of Governors of the Federal Reserve System, 967 F.2d 630 (D.C. Cir. 1992)..................................................... 6, 12-13 Johnson v. Greater Southeast Community Hosp. Corp., 951 F.2d 1268 (D.C. Cir. 1991) .....................................................................................................10 Laxalt v. McClatchy, 809 F.2d 885 (D.C. Cir. 1987) ..............................................................10, 13 Lesar v. Department of Justice, 636 F.2d 472 (D.C. Cir. 1980) ....................................................14 Russell v. Department of the Air Force, 682 F.2d 1045 (D.C. Cir. 1982) .....................................12 United States v. Hubbard, 650 F.2d 293 (D.C. Cir. 1980) ......................................................10, 25

United States District Court Cases Bloomberg, L.P. v. SEC, 357 F. Supp. 2d 156 (D.D.C. 2004) .......................................................12 Cofield v. City of LaGrange, 913 F. Supp. 608 (D.D.C. 1996) .....................................................12 Judicial Watch, Inc. v. U.S. Dep't of Commerce, 90 F. Supp. 2d 9 (D.D.C. 2000) ...............................................................................................11, 12 Judicial Watch, Inc. v. Reno, No. 00-CIV-723, 2001 U.S. Dist. LEXIS 25318 (D.D.C. March 30, 2001) ..............................................................12

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Stolt-Nielson Trans Group v. United States, 480 F. Supp. 2d 166 (D.D.C. 2007) .....................................................................................6, 11, 12

Statutes 5 U.S.C. 552 ................................................................................................................................10 5 U.S.C. 552a ............................................................................................................................6, 9 18 U.S.C. 1905 ............................................................................................................................10

Rules Fed. R. Civ. P. 5.2 ........................................................................................................................7, 9 Fed. R. Civ. P. 26 .........................................................................................................................7, 9

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I.

INTRODUCTION Plaintiffs allege that defendants committed various types of securities fraud and seek

billions of dollars in damages. The parties have now filed various motions for summary judgment with each party claiming that there is no dispute of any material fact that would hinder a judgment in that partys favor. The documents at issue herein constitute a small number of exhibits to those motions for summary judgment. For many of these documents, the only dispute lies in whether a few lines of that particular document will be redacted. Through extensive meet and confers with the parties, the Federal Housing Finance Agency (FHFA) has greatly narrowed the scope of what this Court needs to decide. The only documents still in dispute are those whose release would harm the Agencys on-going examination and deliberative processes, or would have a chilling effect on investigations conducted by inspectors general, if publicly disclosed. Significantly, the protective order the FHFA seeks would not impair the parties use of the documents, but would only prevent the public release of the documents or, in most cases, certain portions of documents at this time. As this Nation continues to address the collapse of the housing market that led to the worst economic crisis since the Great Depression, the FHFAs mission to [p]rovide effective supervision, regulation and housing mission oversight of Fannie Mae, Freddie Mac and the Federal Home Loan Banks so as to promote their safety and soundness, support housing finance and affordable housing, and support a stable and liquid mortgage market has taken on historic significance.1 The FHFA placed both Fannie Mae and Freddie Mac into Conservatorship on September 6, 2008. Contemporaneously, the United States Treasury entered into Senior Preferred Stock Purchase Agreements with the Enterprises through which the
1

http://www.FHFA.gov/Default.aspx?Page=38.

DM1\3101427.9

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Treasury agreed to provide each Enterprise with funding sufficient to avoid negative net worth at each quarters end. To date, Treasury has kept the Enterprises afloat through quarterly injections, the sum of which now total nearly $200 billion in taxpayer money. With the condition of the housing market and an enormous amount of taxpayer money in the balance, preservation of the FHFAs fulsome and candid communications both within the Agency and with the Enterprises is essential to the Nations economy. The Agency seeks to protect from public disclosure documents that could damage the FHFAs on-going intra-Agency communications and communications with its regulated entities. These documents are traditionally afforded a qualified protection through the deliberative process privilege, the examination privilege, and the Privacy Act. The Agency is not asserting these privileges to prevent the parties from using the documents in this case, but is invoking the policy underlying these privileges to establish good cause for a protective order to prevent public disclosure. These privileges and protections are meant to facilitate the fulsome and candid communication required for a federal regulator to competently perform its statutory charge. See, e.g., In re Subpoena Served Upon the Comptroller of the Currency, and the Secretary of the Board of Governors of the Federal Reserve System, 967 F.2d 630, 633 (D.C. Cir. 1992); StoltNielson Trans Group v. United States, 480 F. Supp. 2d 166, 178 (D.D.C. 2007). All of the documents, if released, would damage the ongoing relationship the Agency has with the Enterprises in addition to damaging the deliberative process within the Agency. But while public release of the document would harm the Agencys on-going processes, the documents some parties seek to release have either no relevance or have such limited relevance as to not outweigh the Agencys good cause to keep them under seal. The documents the parties seek to publicly release fall within three categories: (1) those reflecting Fannie Maes

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communications to the Agency and the Agencys analysis of these communications and documents; (2) those reflecting internal Agency communications between Agency personnel; and (3) transcript testimony of various OFHEO officials given during an investigation by the HUD Inspector General or documents revealing such testimony. The documents in the first group are irrelevant for what they conspicuously lack. Not one document reflects a communication that Franklin Raines, Timothy Howard, or Leanne Spencer had with OFHEO. As to those documents in the second and third groups, there is no indication that any party to this case was aware of any of OFHEOs internal discussions regarding Fannie Mae or of the testimony. As a result, none of the documents are probative as to intent or lack thereof to commit fraud. Under Rules 5.2(e) and 26(c) of the Federal Rules of Civil Procedure, the FHFA must demonstrate good cause for the Court to issue a protective order over the contested documents. Through its predecessor, the Agency produced an enormous quantity of material subject to this Courts pretrial protective order. See, e.g., 2/27/09, p. 15:7-11. The parties have sought to use only an infinitesimal amount of that production in their motions for summary judgment. Through the Agencys and the parties diligent efforts, an even smaller number of documents are being presented to the Court. Given the negligible relevance of these remaining contested documents and the harm that the public release of the documents would have on the FHFAs mission, an order preventing the public disclosure of the contested documents is appropriate.

II.

FACTUAL BACKGROUND A pretrial protective order has governed the treatment of produced confidential material

in this case since April 24, 2006. Dkt. 137. Many of the documents that the Agency produced and all of the documents contested herein are protected by this Courts pretrial protective orders. 7

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See Dkt. 556. When the Agency was producing documents, it specifically relied on the protections afforded by this Court through the protective orders. See, e.g., Dkt. 334, p. 2 (Despite OFHEOs decision to produce documents subject to a reservation of the examination privilege within the confines of the Protective Order, no documents covered by the examination privilege are public documents.). As the Agency continued to produce documents, various issues concerning the Agencys deliberative process were debated and litigated. The Court had numerous occasions to balance the Agencys interest in maintaining the privilege against the parties need for the documents. See, e.g., Motion Hearings 7/20/09, 7/22/09. In making those decisions, the parties and the Court indicated that the presence of the protective order ameliorated the Agencys concerns regarding the production of the documents. See, e.g., TR. 2/27/09, p. 15:7-11 (by the Court: There is a Protective Order here. They can't use it in any other case, any other litigation, any other setting. They are duty bound under the code, not only the order, but they are duty bound under the Code of Professional Conduct. What can they do?), p. 7:11-13 (by counsel for KPMG: We are saying that within the bounds of the Protective Order here this Court has entered that we would use the same sneak-a-peek approach.), p. 9:2410:4 (by counsel for KPMG: District Judges understand precisely what you understood that the volumes of materials that are in this kind of quagmire of deliberative process, possibly privileged or not, are such that you really need something to be able to allow the honor of lawyers looking at this under a Protective Order to make a judgment pro or con to go forward.). The Agency relied on the protections afforded by this Courts protective orders throughout its productions in this case.

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III.

ARGUMENT The FHFA is entitled to a protective order preventing the public disclosure of the

contested documents upon a showing of good cause. See Fed. R. Civ. P. 5.2(e), 26(c). Here, the Agency has demonstrated good cause. The release of any of the documents would damage the Agencys ability to fulfill its mission at a time of crisis in the housing market. The Agency depends on fulsome and candid communications within the Agency and with the regulated entities in order to complete its mission. Disclosure of the Agencys internal discussions will harm the quality of those discussions and may, as a result, reduce the quality of the Agencys final determinations. Disclosure of the Agencys communications with the regulated entities will make it more difficult for the Agency to obtain full and candid information regarding the activities of the regulated entities, which will undermine the efficacy of the entire regulatory framework. Moreover, many of the documents are protected under the Privacy Act. 5 U.S.C. 552a. The release of this information (testimony taken during the HUD IG investigation) would not only run counter to the Privacy Act, but also will have a chilling effect on the ability of government agencies to encourage employees to cooperate in such investigations. The protective order that the FHFA requests will not only prevent that harm, but will permit the parties to use the documents for whatever negligible evidentiary value they may have in this case. The Court should grant the requested protective order.

A.

Standard.

Liberal discovery is provided for the sole purpose of assisting in the preparation and trial, or the settlement, of litigated disputes. Seattle Times Co. v. Rhinehart, 467 U.S. 20, 34, 104 S. Ct. 2199, 92 L. Ed. 2d 17 (1984). And [t]here is an opportunity, therefore, for litigants

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to obtain -- incidentally or purposefully -- information that not only is irrelevant but if publicly released could be damaging to reputation and privacy. Id. Through Rules 5.2(e) and 26(c), the Court may give effect to the Governments substantial interest in preventing this sort of abuse of its processes. Id. When doing so, the Court may evaluate the facts and circumstances presentedincluding whether the documents are non-public, the Governmental interests in the documents, and the prejudice that will result from publicizing the documents. Though there is a strong presumption in favor of public access to judicial proceedings, Johnson v. Greater Southeast Community Hosp. Corp., 951 F.2d 1268, 1277 (D.C. Cir. 1991), that presumption may be overcome by balancing the Hubbard factors: (1) the need for public access to the documents at issue; (2) the extent of previous public access to the documents; (3) the fact that someone has objected to disclosure, and the identity of that person; (4) the strength of any property and privacy interests asserted; (5) the possibility of prejudice to those opposing disclosure; and (6) the purposes for which the documents were introduced during the judicial proceedings. EEOC v. Natl Childrens Ctr., Inc., 98 F.3d 1406, 1409 (D.C. Cir. 1996) (citing United States v. Hubbard, 650 F.2d 293, 317-22 (D.C. Cir. 1980). When considering the Hubbard factors and the protective order the FHFA seeks, the Court must consider that the Privacy Act protects a number of documents the parties seek to publish. See Laxalt v. McClatchy, 809 F.2d 885, 889 (D.C. Cir. 1987). The Court must also take into consideration that the Agency would and has denied public access to the contested documents under applicable FOIA exceptions and, in fact, is under a legal obligation to keep the contested documents from being publicly available. See 5 U.S.C. 552(b); 18 U.S.C. 1905; Examination Handbook, Office of Federal Housing Enterprise Oversight, Office of Examination and Oversight Chapter 3 (December 1998). And the Court must consider the detrimental impact that the public release would have on the Agencys internal deliberative processes and its ongoing examinations of the Agencys regulated 10

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entities. Finally, this Court should recall that even though most of the documents produced by the Agency in this litigation would be protected by the Examination Privilege, the Agency produced the documents without raising the privilege on a document-by-document basis because there was a protective order in place to prevent public disclosure of the documents. As this Court stated to counsel for the Agency in a hearing, There is a Protective Order here. [The parties] can't use [the documents] in any other case, any other litigation, any other setting. They are duty bound under the code, not only the order, but they are duty bound under the Code of Professional Conduct. TR. 2/27/09 p. 15:7-11. The Agency relied on these protections. As such, each of these factors, taken individually or cumulatively, constitute good cause for the protective order sought.

B.

The Agencys Deliberative Processes Would Be Harmed By Disclosure.

The FHFAs deliberative processes would be harmed by public disclosure of the contested documents. The quality of administrative decision-making would be seriously undermined if agencies were forced to operate in a fish bowl. See Judicial Watch, Inc. v. U.S. Dep't of Commerce, 90 F. Supp. 2d 9, 13-15 (D.D.C. 2000) (quoting Dow Jones & Co. v. U.S. Dep't of Justice, 917 F.2d 573 (D.C. Cir. 1990); NLRB v. Sears, Roebuck & Co., 421 U.S. 132, 151, 95 S. Ct. 1504, 1516, 44 L. Ed. 2d 29 (1975). Protecting deliberations from public disclosure will assure that subordinates within an agency will feel free to provide the decision maker with their uninhibited opinions and recommendations without fear of later being subject to public ridicule or criticism. Stolt-Nielson Trans Group v. United States, 480 F. Supp. 2d 166, 178 (D.D.C. 2007). By the same token, the protection will ensure that decision-makers feel free to reach out to subordinates for information and advice to better inform and strengthen decisions

11

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and policies.2 The Governments strong interest in maintaining that confidentiality is also grounded in a desire to encourage open, frank discussions on matters of policy within the agencies, to protect against public confusion from premature disclosure of proposed policies, and to protect the integrity of the decision-making process. Judicial Watch, Inc. v. Reno, No. 00CIV-723, 2001 U.S. Dist. LEXIS 25318, *6 (D.D.C. March 30, 2001); Russell v. Department of the Air Force, 682 F.2d 1045, 1048 (D.C. Cir. 1982); Stolt-Nielson, 480 F. Supp. 2d at 178. Vitiating the Governments interest would chill participation in the deliberative process and cause injury to the quality of agency decisions. Cofield v. City of LaGrange, 913 F. Supp. 608, 615 (D.D.C. 1996) (quoting NLRB v. Sears, Roebuck & Co., 421 U.S. at 151. As discussed below, many of the documents the parties seek to publicize bear directly on the Agencys internal deliberations. Disclosure of those documents would harm the Agencys deliberative processes.

C.

The Agencys Examination Process Would Be Harmed By Disclosure.

The FHFAs examination process and communications with its regulated entities would also be compromised by the public release of the contested documents. As the D.C. Circuit has opined: safety and soundness supervision is an iterative process of comment by the regulators and response by the [regulated entity]. The success of the supervision therefore depends vitally upon the quality of communication between the regulated. . .firm and the . . . regulatory agency. Because . . . supervision is relatively informal and more or less continuous, so too must be the flow of communication between the [regulated entity] and the regulatory
2

The rationale for protecting an agencys deliberative processes does not require the agency make any final determination. Judicial Watch, Inc. v. U.S. Dept. of Commerce, 90 F. Supp. 2d 9, 14 (D.D.C. 2000). Rather, it is the give-and-take of the consultative process that merits protection. Bloomberg, L.P. v. SEC, 357 F. Supp. 2d 156, 168 (D.D.C. 2004). 12

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agency. [The regulated entitys] management must be open and forthcoming in response to the inquiries of . . . examiners, and the examiners must in turn be frank in expressing their concerns about the [regulated entity]. These conditions simply could not be met as well if communications between the [regulated entity] and its regulators were not privileged. In re Subpoena Served Upon the Comptroller of the Currency, and the Secretary of the Board of Governors of the Federal Reserve System, 967 F.2d 630, 633 (D.C. Cir. 1992). Many of the documents the parties seek to publicize reflect communications between the Agencys examiners and Fannie Mae employees. As a result, publication of those documents would erode the confidence current employees of the regulated entities have that their communications with the Agency will not be disclosed. Without that confidence, the Agencys ability to obtain fulsome and candid information about the regulated entities will be impaired. That, in turn, will compromise the Agencys ability to regulate the Enterprisesa particularly troubling development in this time of historic crisis. The discussion below on the contested documents, it is clear that disclosure of the contested documents will cause the precise harm against which the examination protections are meant to protect.

D.

The Policy Underlying the Privacy Act Weighs In Favor Of The Protective Order.

The parties also seek to publicize the system of records maintained by the Inspector General for the Department of Housing and Urban Development. Through the Privacy Act, Congress has articulated its judgment that these documents should be shielded from public release. See Laxalt, 809 F.2d at 889. The protection exists for a good reasonif Inspector General investigatory files are not kept secret, then there will be a chilling effect on would-be cooperators. Potential cooperators would fear retribution, scorn, or even public ridicule. Moreover, targets or subjects of an investigation who are not prosecuted would be exposed to 13

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public scorn or humiliation if selected portions of an Inspector Generals investigation were made public as part of a litigation strategy in a wholly separate litigation. Lesar v. Department of Justice, 636 F.2d 472, 488 (D.C. Cir. 1980) (finding that an individuals privacy interest weighs against public disclosure of the individuals association with a law enforcement file because the disclosure may cause embarrassment or reputational harm sufficient to impair the persons privacy interests). Both of these policy rationales underlying the Privacy Act are implicated here. The parties seek to publicly identify government employees who cooperated with the HUD Inspector General, including those who acted as confidential witnesses,3 and the parties seek to expose the targets of the HUD Inspector General investigation to public scorn. That fact is clear from the parties selective use of the investigation file. Their litigation strategy is to try their case in the court of public opinion. The Inspector Generals full report is publicly available and could be used in whole or part. But instead, the defendants seek to use selected bits and pieces of the non-public documents underlying the Inspector Generals report for their improper motives. If there is any evidentiary value to what the parties seek to use (and there is not), then the parties can still garner that benefit within the confines of the protective order the Agency seeks. But the policy underlying the Privacy Act clearly weighs in favor of granting the FHFAs motion.

All of the witnesses interviewed by the HUD Inspector General have objected to the release of their names and their testimony. Moreover, the HUD Inspector General opposes the release of the material in his investigative files. Dkt. 1003. The FHFA adopts and joins the reasoning set forth in the Inspector Generals filing. 14

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E.

Each Document Warrants Protection. 1. 56 sample derivative transactions. (TAB 1)4

The FHFA seeks to prevent the public disclosure of portions of Exhibit 8 to the Declaration of Adam B. Miller in Support of Defendant Leanne G. Spencers Motion for Summary Judgment. The same document is attached as Exhibit 80 to the Declaration of Lissa Percopo in Support of Defendants Joint Motion for Partial Summary Judgment Based on FAS 133 Accounting Issues. The exhibit is a chart detailing an OFHEO examiners comments regarding 56 sample derivative transactions. One column of the chart is titled comments and contains the examiners analysis and opinions. Another column of the chart contains implications. These columns contain information that constitutes or reflects pre-decisional, deliberative, personal opinion of an agency employee prepared to assist in rendering a supervisory decision. The document reflects open debate of alternative approaches to supervisory action and production would inaccurately reflect the views of OFHEO. The exhibit is also an internal agency document relating to the Agencys examinations of Fannie Mae, and any analyses, opinions, and recommendations therein should not be disclosed to the public. Consequently, the FHFA requests that the implications and comments columns be redacted before filing. Attached to this motion at Tab 1 are relevant pages of the exhibit with yellow highlighting to reflect which portions of the exhibit the FHFA seeks to have redacted. 2. OFHEO internal PowerPoint presentation. (TAB 2)

The FHFA seeks to prevent the public disclosure of Exhibit 9 to the Declaration of Adam B. Miller in Support of Defendant Leanne G. Spencers Motion for Summary Judgment. The

FHFA expects to file its Exhibits to this Motion under seal. FHFA will send a courtesy copy to the Court in a binder. Exhibits to this Motion will be referred to by the Tab behind which they appear in the binder. 15

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same document is attached as Exhibit 78 to the Declaration of Lissa Percopo in Support of Defendants Joint Motion for Partial Summary Judgment Based on FAS 133 Accounting Issues. The exhibit is a PowerPoint presentation titled GSE Adoption of FAS 133. The document was prepared by an OFHEO examiner to give a presentation to OFHEO management regarding adoption of the FAS 133 accounting standard by Fannie Mae and Freddie Mac. The document contains information that constitutes or reflects pre-decisional, deliberative, personal opinion of an agency employee prepared to assist in rendering a supervisory decision. The document reflects open debate of alternative approaches to supervisory action and production would inaccurately reflect the views of OFHEO. The exhibit is also an internal agency document relating to the Agencys examinations of Fannie Mae and Freddie Mac, and any analyses, opinions, and recommendations therein should not be disclosed to the public. Consequently, the FHFA requests that the document remain under seal. Attached to this motion at Tab 2 is the presentation in question. 3. Excerpts of Deposition Testimony of OFHEO Examiners regarding the 56 sample derivative transactions and PowerPoint Presentation. (TAB 3, 4)

The FHFA seeks to prevent the public disclosure of portions of Exhibit 192 to the Declaration of Adam B. Miller in Support of Defendant Leanne G. Spencers Motion for Summary Judgment and portions of Exhibit 7 to Declaration of Lissa Percopo in Support of Defendants Joint Motion for Partial Summary Judgment Based on FAS 133 Accounting Issues. These exhibits are excerpts of the deposition testimony of the OFHEO examiner who prepared the chart of 56 sample derivative transactions and the PowerPoint presentation described above. These transcript excerpts contain the examiners testimony related to those documents. The testimony reveals pre-decisional, deliberative, personal opinion of an Agency employee regarding internal Agency documents. For the reasons explained above with respect to the two 16

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documents that are the subject of the deposition testimony, the FHFA requests that portions of the testimony related to those documents be redacted before filing. Attached to this motion at Tabs 3 and 4 are relevant pages of the deposition transcript with yellow highlighting to reflect the portions of the testimony that FHFA seeks to have redacted. 4. Derivative Working Group Staff Notes to the Director. (TAB 5)

The FHFA seeks to prevent the public disclosure of Exhibit 41 to the Declaration of Adam B. Miller in Support of Defendant Leanne G. Spencers Motion for Summary Judgment. The same document is attached as Exhibit 8 to the Declaration of Lissa Percopo in Support of Defendants Joint Motion for Partial Summary Judgment Based on FAS 133 Accounting Issues. This exhibit is titled Derivatives Working Group Staff Notes to the Director. The document was prepared by OFHEO personnel for the Director of the Agency regarding the FAS 133 accounting standard and regarding what regulatory policy the Agency would take with respect to the standard. The document is a draft and was never finalized. The document contains information that constitutes or reflects pre-decisional, deliberative, personal opinion of agency personnel prepared to assist in rendering a supervisory decision. The document reflects open debate of alternative approaches to supervisory action and production would inaccurately reflect the views of OFHEO. The exhibit is also an internal Agency document relating to the Agencys examinations of Fannie Mae and Freddie Mac, and any analyses, opinions, and recommendations therein should not be disclosed to the public. Consequently, the FHFA requests that the document remain under seal. Attached to this motion at Tab 5 is the document in question. 5. Portions of Expert Report of William H. Holder regarding the Staff Notes. (TAB 6)

The FHFA seeks to prevent the public disclosure of very small portions of Exhibit 36 to the Declaration of Monica K. Loseman in Support of KPMG LLPs Opposition to Lead

17

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Plaintiffs Motion for Partial Summary Judgment on Count III Against Defendant KPMG LLP. The same document is attached as Exhibit 25 to the Declaration of Monica K. Loseman in Support of KPMG LLPs Motion for Summary Judgment. The exhibit is the expert report of William W. Holder. The report quotes from and cites to portions of the Derivatives Working Group Staff Notes to the Director, described above. For the reasons explained above with respect to that document, the FHFA requests that two footnotes containing citations to the document be redacted before filing. The FHFA does not seek to redact the text to which the report cites, because redactions of only these citations serves the purpose of protecting the Agencys deliberative and examination processes. Attached to this motion at Tab 6 is the relevant page of the expert report with yellow highlighting to reflect the footnotes the FHFA seeks to have redacted. 6. Quarterly Assessment of Fannie Mae Market Risk. (TAB 7)

The FHFA seeks to prevent the public disclosure of Exhibits 82 through 87 to the Declaration of Lissa Percopo in Support of Defendants Joint Motion for Partial Summary Judgment Based on FAS 133 Accounting Issues. These exhibits are Quarterly Assessments of Fannie Mae market risk. The documents were prepared by OFHEO examiners to assess and rate Fannie Maes compliance with safety and soundness standards related to market risks. Each quarterly assessment is in the form of a chart, which includes a comments column containing the analysis and opinions of Agency examiners. The documents contain information that constitutes or reflects pre-decisional, deliberative, personal opinion of an Agency employee prepared to assist in rendering a supervisory decision. The documents reflect open debate of alternative approaches to supervisory action and production would inaccurately reflect the views of OFHEO. The exhibits are also internal Agency documents relating to the Agencys examinations of Fannie Mae, and any analyses, opinions, and recommendations therein should 18

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not be disclosed to the public. Consequently, the FHFA requests that the documents remain under seal. Attached to this motion at Tab 7 are the quarterly reports in question. 7. Portions of Deposition of OFHEO Examiner regarding the Quarterly Assessments of Fannie Mae Market Risk. (TAB 8)

The FHFA seeks to prevent the public disclosure of portions of Exhibit 9 to the Declaration of Lissa Percopo in Support of Defendants Joint Motion for Partial Summary Judgment Based on FAS 133 Accounting Issues. This exhibit is the transcript of Day 4 of the deposition of an OFHEO examiner. This transcript volume contains the examiners testimony related to the quarterly assessments described above. The testimony reveals pre-decisional, deliberative, personal opinion of an Agency employee regarding internal Agency documents. For the reasons explained above with respect to the quarterly assessments that are the subject of the deposition testimony, the FHFA requests that portions of the testimony related to those documents be redacted before filing. Attached to this motion at Tab 8 are relevant pages of the deposition transcript with yellow highlighting to reflect which portions of the testimony the FHFA seeks to have redacted. 8. Deposition testimony of OFHEO personnel regarding Freddie Mac Application of FAS 133. (TAB 9)

The FHFA seeks to prevent the public disclosure of portions of Exhibit 114 to the Declaration of Lissa Percopo in Support of Defendants Joint Motion for Partial Summary Judgment Based on FAS 133 Accounting Issues. The exhibit is the transcript of the deposition of an OFHEO employee. The transcript contains the examiners testimony related to Freddie Macs application of the FAS 133 accounting standard as reflected in an investigative report in 2007. The testimony is irrelevant to this case, and it reveals pre-decisional, deliberative, personal opinion of an Agency employee. The document reflects open debate of alternative approaches to supervisory action and production would inaccurately reflect the views of 19

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OFHEO. The exhibit is also an internal Agency document relating to the Agencys examinations of Freddie Mac, and any analyses, opinions, and recommendations therein should not be disclosed to the public. Consequently, the FHFA requests that the document remain under seal. Attached to this motion at Tab 9 is the transcript in question. 9. Email from then Acting Director of OFHEO to personnel regarding Special Examination of Fannie Mae. (TAB 10)

The FHFA seeks to prevent the public disclosure of Exhibit 82 to the Declaration of Eric Delinsky in Support of Defendant J. Timothy Howards Reply in Support of his Motion for Summary Judgment. The exhibit is an internal OFHEO email from Stephen Blumenthal to four OFHEO employees regarding a request for information and an agenda for a meeting to discuss the Special Examination of Fannie Mae. The document contains information that constitutes or reflects pre-decisional, deliberative, personal opinion of the Agency Acting Director related to a then-ongoing special examination. The Directors request for information and the agenda are clearly part of the pre-decisional and deliberative process. The exhibit is an internal Agency document relating to the Agencys examinations of Fannie Mae, and any analyses, opinions, and recommendations therein should not be disclosed to the public. Consequently, the FHFA requests that the document remain under seal. Attached to this motion at Tab 10 is the email in question. 10. Email from then Acting Director of OFHEO to personnel regarding Freddie Mac Special Examination. (TAB 11)

The FHFA seeks to prevent the public disclosure of Exhibit 78 to the Declaration of Monica K. Loseman in Support of KPMG LLPs Opposition to Lead Plaintiffs Motion for Partial Summary Judgment on Count III Against Defendant KPMG LLP. The exhibit is an internal OFHEO email from Stephen Blumenthal to several OFHEO employees regarding the Special Examination of Freddie Mac. It is therefore irrelevant to the issues of this case. In 20

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addition to being irrelevant, the document contains information that constitutes or reflects the personal opinion of an Agency employee related to a then-ongoing special examination, and the document would inaccurately reflect the views of OFHEO. Consequently, the FHFA requests that the document remain under seal. Attached to this motion at Tab 11 is the email in question. 11. Email from then Counsel to the Director of OFHEO to a non-agency person. (TAB 12)

The FHFA seeks to prevent the public disclosure of Exhibit 79 to the Declaration of Monica K. Loseman in Support of KPMG LLPs Opposition to Lead Plaintiffs Motion for Partial Summary Judgment on Count III Against Defendant KPMG LLP. The exhibit is a personal email sent from Stephen Blumenthals OFHEO email account to a person outside the Agency. The document references the Special Examination of Freddie Mac, and it appears to contain an irreverent joke and photo attachment sent by Mr. Blumenthal before he became the Agencys Acting Director. It is therefore irrelevant to the issues of this case. KPMG is free to use this document in support of its opposition to Lead Plaintiffs motion (for what it is worth) and are free to attempt to move this document into evidence at trial. The only possible purpose of publically revealing this document at this time is to embarrass Mr. Blumenthal and the Agency. As this Court is aware, this document would not ordinarily have been produced in this litigation but for the lack of any relevance review during the electronic production of Mr. Blumenthals emails. The lack of any relevance review could only be justified by the fact that there was a protective order in this case to ensure that irrelevant, personal emails would be shielded from the public view. Consequently, the FHFA requests that the document remain under seal. Attached to this motion at Tab 12 is the email in question.

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12.

Email chain between then counselor to the Director of OFHEO and an Examiner. (TAB 13)

The FHFA seeks to prevent the public disclosure of Exhibit 82 to the Declaration of Monica K. Loseman in Support of KPMG LLPs Opposition to Lead Plaintiffs Motion for Partial Summary Judgment on Count III Against Defendant KPMG LLP. The exhibit is an internal OFHEO email chain between an OFHEO examiner and Stephen Blumenthal before he became the Agency Acting Director regarding a news report related to the linking of Fannie Maes stock options program to its goal to double earnings in five years. The document contains information that constitutes or reflects pre-decisional, deliberative, personal opinion of an Agency employee prepared to assist in rendering a supervisory decision. The document reflects open debate of alternative approaches to supervisory action and production would inaccurately reflect the views of OFHEO. The exhibit is also an internal Agency document relating to the Agencys examinations of Fannie Mae, and any analyses, opinions, and recommendations therein should not be disclosed to the public. In addition, the email contains what is obviously a joke by Mr. Blumenthal related to widely known, controversial comments of the President of the United States less than five months earlier. The joke is irrelevant to the issues of the case. Consequently, the FHFA requests that the document remain under seal. Attached to this motion at Tab 13 is the email in question. 13. Examiner notes regarding a presentation by the then Acting Director of OFHEO to certain Agency personnel. (TAB 14, 15)

The FHFA seeks to prevent the public disclosure of Exhibits 15 and 16 to the Declaration of Monica K. Loseman in Support of KPMG LLPs Opposition to Lead Plaintiffs Motion for Partial Summary Judgment on Count III Against Defendant KPMG LLP. Exhibit 15 is an excerpt of the deposition testimony of an OFHEO examiner regarding a meeting with OFHEO personnel and the examiners notes reflecting the examiners impressions and perceptions of a 22

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presentation made during the meeting. Exhibit 16 contains the notes referred to in the testimony. The testimony and the handwritten notes contain information that constitutes or reflects predecisional, deliberative, personal opinion of Agency employees. The documents reflect open debate of alternative approaches to supervisory action and production would inaccurately reflect the views of OFHEO. The notes are also an internal Agency document relating to the Agencys examinations of Fannie Mae and Freddie Mac, and any analyses, opinions, and recommendations in the notes or revealed in testimony regarding the notes should not be disclosed to the public. Consequently, the FHFA requests that both exhibits remain sealed. Attached to this motion at Tabs 14 and 15 are the transcript and the notes. 14. Portions of Expert Report quoting deposition testimony regarding the HUD Inspector Generals investigation. (TAB 16)

The FHFA seeks to prevent the public disclosure of portions of Exhibit 83 to the Declaration of Eric Delinsky in Support of Defendant J. Timothy Howards Reply in Support of his Motion for Summary Judgment. This document is the expert report of James Barth. The report extensively quotes from and cites to transcripts of the depositions of OFHEO employees and extensively reveals pre-decisional, deliberative, personal opinion of Agency employees, as well as portions of HUD IG testimony. The document reflects open debate of alternative approaches to supervisory action and production would inaccurately reflect the views of OFHEO. To the extent that the document reveals analyses, opinions, and recommendations of agency personnel, those portions should not be disclosed to the public. Consequently, the FHFA requests that those portions be redacted before filing. The FHFA seeks to have other portions of this document redacted for additional reasons explained below. Attached to this motion at Tab 16 are the relevant pages of the expert report with yellow highlighting to reflect the portions the FHFA seeks to have redacted. 23

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15.

HUD IG Investigation testimony and documents. (TAB 15-22)

The FHFA seeks to prevent the public disclosure of portions of Exhibit 83 and all of Exhibit 84 to the Declaration of Eric Delinsky in Support of Defendant J. Timothy Howards Reply in Support of his Motion for Summary Judgment, portions of Exhibit 111 to the Declaration of Lissa Percopo in Support of Defendants Joint Motion for Partial Summary Judgment Based on FAS 133 Accounting Issues, all of Exhibit 16 to the Declaration of Monica K. Loseman in Support of KPMG LLPs Opposition to Lead Plaintiffs Motion for Partial Summary Judgment on Count III against Defendant KPMG LLP, Exhibit 112 to the Declaration of Monica K. Loseman in Support of KPMG LLPs Motion for Summary Judgment, and small portions of Exhibits 3, 6, and 9 to the Declaration of W.B. Markovits in Support of Lead Plaintiffs Memorandums of Points and Authorities in Opposition to Defendants Joint Motion for Summary Judgment for Failure to Prove Loss Causation. These exhibits contain or discuss portions of the HUD IGs investigatory file. Through these exhibits, the parties seek to expose the names of people who cooperated with the HUD Inspector Generals investigation or to use the testimony elicited from those witnesses during the course of the Inspector Generals investigation. Through the Privacy Act, Congress has expressed its judgment that all of the materials should be non-public. Release of the information would cause reputational harm not just to the targets of the Inspector Generals investigation, but also to the cooperating and confidential witnesses. Moreover, public release would deter future cooperating and confidential witnesses because those potential witnesses would not be reasonably assured of anonymity. In addition, public release of portions of the Inspector Generals investigatory file (as opposed to the Inspector Generals report, which is publicly available) will serve only the distorted view the parties wish to present to advance their litigation strategies in this case. The effect of the public release would be to present a distorted view of the Agencys deliberative processes, which has 24

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implications far beyond this case. Because the public release would demonstrate the Agencys deliberative processes to which its regulated entities (and the public) are not privy, the public release would harm the Agencys on-going examination efforts with the regulated entities. Consequently, the FHFA requests that the documents or portions of documents be sealed or redacted. Attached to this motion at Tabs 15 through 22, are the relevant pages of each exhibit. For those documents where redaction is sought, the exhibits include yellow highlighting to reflect which portions of the exhibit the FHFA seeks to have redacted. IV. CONCLUSION When evaluating the facts and circumstances of this case in the context of the Hubbard factors, it is clear that the documents that the parties seek to release publicly have not previously been in the public domain, the Government has strong interests in maintaining the confidentiality of the material, and the Government will be prejudiced by the public release of the information. Moreover, there is no need for the public to access the documents. And, to the extent there could be any arguable evidentiary value to the documents (and there is none), there are publicly available documents that the parties could use. For these reasons, the Federal Housing Finance Agency respectfully moves for a protective order to prevent the public release of the documents found in the exhibits.

Dated: February 9, 2012

Respectfully submitted, /s/ Joseph J. Aronica Joseph J. Aronica DUANE MORRIS LLP 505 9th Street N.W., Suite 1000 Washington, DC 20004 Phone: (202) 776-7824 Fax: (202) 478-1885

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Stephen E. Hart FEDERAL HOUSING FINANCE AGENCY 1700 G Street, N.W. Washington, DC 20552 Phone: (202) 414-3800 Fax: (202) 414-6504 Attorneys for the Federal Housing Finance Agency

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