Any American who reads this and does not feel compelled to stop it really needs to examine their beliefs.I am simply going to post the brief first 8 pages containing the preliminary statement from the Ackman/Commons injunction complaint.This requires very little analysis as it stands alone quite well. It presents very simply exactly what our government has done. This type of action is exactly what our founding fathers warned of, please folks for Gods sake take a few minutes and study theses eight pages. This is what happens when too many citizens choose blindly to believe the leaders of their parties. This is what happens when the majority of our citizens falsely believe that freedom is free. Thank God we have a judicial branch in our government, they are our last line of defense against this kind of government tyranny. Please send this brief portion of the complaint to your congressman and ask that if this is the America that your vote for them will get you? Send it to your newspaper editors and remind them the critical role they play in a democracy. The summons have gone out in this case today. How sweet it was reading each and every one. Demanding that those responsible answer to these crimes. I have attached a PDF below of both the summons and the entire complaint. Keep the Faith!

3085 Ebano Drive,
Walnut Creek, CA 94598
4101 Ingomar Street, N.W.
Washington, D.C. 20015
888 7th Avenue, 42nd Floor
New York, New York 10019
1500 Pennsylvania Avenue, N.W.
Washington, D.C. 20220
Constitution Center
400 7th Street, S.W.
Washington, D.C. 20024
JACOB J. LEW, in his official capacity as
Secretary of the Treasury,
1500 Pennsylvania Avenue, N.W.
Washington, D.C. 20220
MELVIN L. WATT, in his official capacity as
Director of the Federal Housing Finance Agency,
Constitution Center
400 7th Street, S.W.
Washington, D.C. 20024
Civil Action No. 14-1404
Case 1:14-cv-01404 Document 1 Filed 08/15/14 Page 1 of 45
Plaintiffs Louise Rafter, Josephine Rattien, Stephen Rattien, and Pershing Square Capital
Management, L.P. (“Pershing Square”) (collectively, the “Plaintiffs”), by and through their
undersigned attorneys, allege as follows:
1. This is an action to redress an unlawful and enormous governmental expropriation
in connection with the conservatorships of the Federal National Mortgage Association (“Fannie
Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”) (individually, a
“Company”; collectively, the “Companies”).
2. In 2012, the Federal Housing Finance Agency (“FHFA”), purportedly acting as
the conservator of the Companies, and the Department of the Treasury (“Treasury”)
(collectively, the “Government”) agreed between themselves to strip all profits from the
Companies and to sweep those profits to Treasury every quarter, in perpetuity (the “Net Worth
Sweep Agreements”).
3. That Government confiscation of the entire net worth of the Companies is
specifically intended not just to reap a windfall for the Government but to deprive the
Companies’ common shareholders of any economic value in their shares. Through the
confiscation, Treasury and FHFA simultaneously seek to “expedite the wind down of Fannie
Mae and Freddie Mac.”
4. The Government’s brazen conduct in establishing the self-dealing Net Worth
Sweep Agreements and requiring the ongoing quarterly sweeps (the “Net Worth Sweeps”) is
illegal. It violates the Administrative Procedure Act and the statute that Congress constructed to
govern conservatorship of the Companies. It breaches FHFA’s and Treasury’s fiduciary duties
to Plaintiffs, including by, in effect, converting Treasury’s special class of preferred shares of the
Case 1:14-cv-01404 Document 1 Filed 08/15/14 Page 2 of 45
Companies into a new super-senior form of preferred shares, for which the principal is never
satisfied despite Treasury’s receiving all residual value of the Companies—a right reserved to
common shares. Simultaneously, the Government’s new regime prevents Plaintiffs, who are
common shareholders, from participating in their rightful economic share of the Companies’
distributions. The Government’s efforts to prevent Plaintiffs from pursuing any of their rights or
powers as common shareholders, even as the Government illegally confiscates the economic
value of their shares and liquidates the Companies, violates fundamental corporate law
principles, including as established by state statute.
5. The Housing and Economic Recovery Act of 2008 (the “Act” or “HERA”)
obligates FHFA as conservator to “put [a Company] in a sound and solvent condition,” “carry on
[its] business,” and “preserve and conserve [its] assets and property.” HERA gives the
conservator no authority to liquidate or wind down the Companies, much less to confiscate their
entire net worth.
6. Treasury and FHFA decided to take the Companies into conservatorship soon
after the enactment of HERA in 2008. HERA had granted Treasury temporary authority to
purchase securities of each Company until the end of 2009. Shortly after appointing itself
conservator in September 2008, FHFA entered into a Senior Preferred Stock Purchase
Agreement with Treasury with respect to each Company (the “Stock Purchase Agreements”).
Those Stock Purchase Agreements allowed each Company to draw funds from Treasury in
exchange for various interests and compensation, including a quarterly dividend at a fixed annual
rate of 10% in cash or 12% in kind. Those basic terms remained in place until Treasury and
FHFA radically altered them, in effect creating an entirely new security, through the 2012 Net
Worth Sweep Agreements.
Case 1:14-cv-01404 Document 1 Filed 08/15/14 Page 3 of 45
7. Congress chartered Fannie Mae and Freddie Mac to operate as privately owned,
for-profit corporations. Their stocks were widely held before conservatorship and remain so
today. Plaintiffs in this action include a retired nurse who has held common shares of Fannie
Mae for approximately 25 years, and a retired psychiatric social worker and a retired scientist
who have held common shares of Fannie Mae for approximately 15 years.
8. HERA makes clear Congress’s intent to “maintain [each Company’s] status as a
private shareholder-owned company.” 12 U.S.C. §§ 1455(l)(1)(C)(v), 1719(g)(1)(C)(v). Under
HERA, only in receivership—in contrast to conservatorship—can the rights of shareholders be
“terminate[d],” id. § 4617(b)(2)(K)(i), and even then, the Act gives shareholders procedural
protections, including the right to seek judicial review. Indeed, upon taking the Companies into
conservatorship and entering into the Stock Purchase Agreements with Treasury, then-FHFA
Director James B. Lockhart publicly affirmed that, during conservatorship, the Companies’ stock
would remain outstanding and continue to trade, and “[s]tockholders w[ould] continue to retain
all rights in the stock’s financial worth” (emphasis added). As then-Treasury Secretary Henry
M. Paulson stated on September 7, 2008, “conservatorship does not eliminate the common stock”
(emphasis added).
9. The Companies’ financial results had improved markedly by 2012. By the end of
the second quarter of 2012, both Companies were profitable, with the prospect of exceptionally
large future profits.
10. Treasury’s authority to purchase securities of the Companies had expired years
earlier, at the end of 2009. But Treasury nevertheless devised the Net Worth Sweep Agreements
with the intention of preventing the Companies’ other shareholders from ever realizing any
economic benefit from their shares, of seizing all of the Companies’ profits for itself, and of
furthering its long-held plan to liquidate the Companies. It is no coincidence that Treasury and
Case 1:14-cv-01404 Document 1 Filed 08/15/14 Page 4 of 45
FHFA executed the Net Worth Sweep Agreements just days after the Companies publicly
disclosed their second quarter 2012 results showing strong profitability.
11. Treasury has reaped an enormous windfall from the Net Worth Sweeps, having
received a total of $218.5 billion. As a result of the Net Worth Sweeps, from 2013 through
September 2014, the Government will have expropriated approximately $130.5 billion more
from the Companies than it was owed under the fixed 10% cash dividend option established in
the Stock Purchase Agreements ($163.4 billion versus $32.9 billion). As of September 2014, the
Government will have stripped and swept approximately $31 billion more from the Companies
than it had invested in them ($218.5 billion versus $187.5 billion).
12. The Net Worth Sweeps have continued unabated: every quarter, FHFA—
purportedly acting as the Companies’ conservator—directs each Company to pay its entire
earnings to Treasury, in cash, without regard to any other shareholders. The scale of the
confiscation is vast: the $31 billion that the Government has to date swept from the Companies
above what it had invested in them equals 4.6% of the total U.S. federal budget deficit during
fiscal year 2013. The Congressional Budget Office estimated in February 2014 that the Net
Worth Sweeps in 2014 alone will equal 0.5% of this year’s U.S. gross domestic product.
13. Moreover, under the terms of the self-dealing Net Worth Sweep Agreements, not
only does Treasury receive the entire net worth of both Companies, but its liquidation
preferences remain intact and undiminished. (Treasury’s liquidation preference for each
Company comprises an initial $1 billion liquidation preference plus the amount of Treasury’s
capital infusions into each Company, totaling $187.5 billion.) Thus, if and when FHFA is
ultimately appointed receiver for the depleted Companies, Treasury having expropriated all of
their profits, Treasury would still stand ahead of all other shareholders with a combined,
undiminished liquidation preference of approximately $189.5 billion.
Case 1:14-cv-01404 Document 1 Filed 08/15/14 Page 5 of 45
14. The Government’s Net Worth Sweeps do not just harm the Companies’ other
shareholders. As further evidence of the Government’s disregard for its statutory
responsibilities, the Net Worth Sweeps eviscerate and imperil the Companies. Freddie Mac has
indicated that, “as a result of the net worth sweep dividend provisions of the senior preferred
stock, [it does] not have the authority to build and retain capital from the earnings generated by
[its] business operations and will not be able to build or retain any net worth surplus or return
capital to stockholders other than Treasury” (emphasis added). Fannie Mae has repeatedly
warned that it will not be able to withstand any serious economic downturn because it cannot
build or retain any capital as a result of the Net Worth Sweeps. Rather than conserving the
Companies’ assets, Defendants are confiscating the entire net worth of the Companies and
effectively liquidating them under the guise of conservatorship.
15. Defendants’ conduct is unlawful. It violates FHFA’s statutory authority and
obligations as the conservator of each Company to preserve and conserve the assets of the
Companies. It constitutes an unauthorized purchase of what are in effect new securities years
after Treasury’s authority to do so expired. It represents blatant self-dealing by the
Government—which is both the Companies’ conservator (FHFA) and their controlling
shareholder (Treasury)—to strip and expropriate all profits from the Companies for the
Government’s sole benefit, to the detriment of Plaintiffs, and thus breaches Defendants’
fiduciary duties to Plaintiffs. The Net Worth Sweeps make Plaintiffs “shareholders” in name
only, rather than the ultimate beneficiaries of the Companies’ value that the law entitles them to
be. The Government’s perpetual confiscations strip them of all economic value in their shares.
16. To make matters worse, the Government has doubled down on its unlawful
confiscation of the entire net worth of the Companies, by claiming that the shareholders have no
right to the procedural protections that they would receive if the Government took the
Case 1:14-cv-01404 Document 1 Filed 08/15/14 Page 6 of 45
Companies into receivership. The only legal way under HERA for the Government to liquidate
the Companies and terminate their shares is via receivership. But Treasury and FHFA chose to
take the Companies into conservatorship, and have no authority to flout the clear distinction that
HERA draws between conservatorship and receivership. Indeed, the Government’s actions
directly contradict its and the Companies’ prior statements regarding conservatorship. In
September 2008, for example, FHFA publicly emphasized that “[u]nder a conservatorship, the
Company is not liquidated. . . . The Conservator cannot make a determination to liquidate the
Company. . . . Receivership is a statutory process for the liquidation of [the Company].” FHFA
even issued a final rule in 2011 with commentary explaining that “allowing capital distributions
to deplete [a Company’s] conservatorship assets would be inconsistent with the agency’s
statutory goals.” Both of the Companies have publicly stated that “unlike conservatorship, the
purpose of which is to conserve [their] assets and return [them] to a sound and solvent condition,
the purpose of receivership is to liquidate [their] assets and resolve claims against [them].” The
Government’s assertion now that the shareholders and the courts have no power to stop its
unlawful conduct is incorrect, contrary to its own public statements, and antithetical to the rule of
17. Indeed, the Government maintains that Plaintiffs have no rights or powers
whatsoever as common shareholders of the Companies, even while it confiscates all economic
value of their shares and illegally winds down the Companies. For example, FHFA summarily
denied valid written demands by Pershing Square to the Companies’ boards of directors for a
books and records inspection, thus violating a fundamental right of common shareholders under
state corporate law. In doing so, FHFA asserted that Pershing Square, as a common shareholder
of the Companies, had no rights or powers at all. The Government is using the conservatorships,
impermissibly, as a sword to expropriate for itself the Companies’ entire net worth and wind
Case 1:14-cv-01404 Document 1 Filed 08/15/14 Page 7 of 45
down the Companies, while simultaneously using them as a shield to attempt to foreclose
Plaintiffs from pursuing any legal rights and powers as common shareholders.
18. The Government’s conduct also violates state fiduciary duty law by giving
Treasury’s special class of preferred stock rights that reside exclusively with the common
shareholders. Fundamental corporate law allows corporations to make cash payments in only a
few ways: meeting business expenses (e.g., payments to suppliers, employees, and for taxes);
paying interest and principal payments on debt; issuing dividends to preferred and common
stockholders; and, finally, making distributions in liquidation. Any other extraction of cash is
contrary to law—in this case, an unlawful Government confiscation. If the Government is
claiming that it has not engaged in an illegal confiscation of the entire net worth of the
Companies, then it has violated corporate law in another way: it has granted itself super-senior
preferred stock, unilaterally appropriating all rights of common shares to residual value and
income generated by the Companies but without extinguishing or even reducing the principal of
the previously issued senior preferred stock. The holders of other senior securities (other
outstanding preferred) and the common stock have thus suffered unique harm. Plaintiffs bring a
direct claim for breach of fiduciary duty to remedy the harm caused to them individually by the
19. This is an action to put an end to the Government’s unlawful conduct. Plaintiffs
seek, and respectfully submit that they are entitled to, a declaratory judgment that the Net Worth
Sweep Agreements and the Net Worth Sweeps pursuant to them are unlawful; injunctive relief
barring Defendants’ ongoing implementation of the Net Worth Sweeps; and rescission or other
equitable and ancillary relief to undo the harm Defendants have done.
Case 1:14-cv-01404 Document 1 Filed 08/15/14 Page 8 of 45

81514-ackmancommons injunction-complaint