Bill Ackman Sues America

In the last year or so, hedge fund billionaire William Ackman has tried to destroy a company that sells diet shakes, played a prominent role in nearly driving a 112-year-old retailer into the ground, helped launch a hostile takeover of a pharmaceutical company in a way that the Securities & Exchange Commission is reportedly examining for potential violation of insider trading law, accused George Soros’ family office of insider trading, and fought and made up with Carl Icahn. Now, Ackman is suing the U.S. government.

Ackman’s Pershing Square hedge fund filed a lawsuit on Thursday claiming the federal government has improperly confiscated the profits of Fannie Mae and Freddie Mac since the mortgage giants were pushed into conservatorship following the financial crisis. Ackman’s hedge fund bought 10% of the common shares of Fannie Mae and Freddie Mac last year, well after the government-sponsored enterprises started paying the vast majority of their huge profits to the federal government, but he has found a retired nurse, retired scientist and a retired social worker who have owned Fannie Mae and Freddie Mac shares for 15 years or more to join him as plaintiffs in the lawsuit.

Ackman’s lawsuit is a change of tactics. He has uncharacteristically remained pretty quiet about his investment in shares of Fannie Mae and Freddie Mac, which trade on the Over The Counter Bulletin Board. His lawsuit follows previous litigation filed by other big money managers like Richard Perry and Bruce Berkowitz that remains pending, however, his effort is different because it solely revolves around the common shares of the GSEs as opposed to the preferred shares, which constitute a big part of the holdings of Perry and Berkowitz. Some observers believe litigation is a weaker tactic for holders of Fannie Mae and Freddie Mac securities than lobbying the federal government over the future of the GSEs, which the Obama Administration is committed to winding down.

On the surface, Ackman’s legal complaint doesn’t look all that different than some of the previous litigation that has been filed. It focuses on the so-called sweep amendment of August 2012, when the Treasury Department and the Federal Housing Finance Agency amended documents so that most of the GSEs’ profits go the Treasury’s senior preferred stock. It revisits the government’s obligations under the law that created the FHFA and gave it authority to place Fannie Mae and Freddie Mac into conservatorship. The complaint is 38 pages long and brings only two claims against the government, just compensation for the taking of private property for public use and breach of implied contract.