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Bill Ackman to Sue U.S. Over Fannie, Freddie Mortgage Profits

NEW YORK (TheStreet) -- Fannie Mae (FNMA) and Freddie Mac (FMCC) common shareholders led by investor Bill Ackman’s Pershing Square Capital Management plan to file on Friday the latest of many shareholder lawsuits against the federal government tied to the profits of the Government Sponsored Enterprises (GSEs), according to a person with knowledge of the suit.

The suit joins others in contending the government wrongfully diverted profits from the GSEs to the Treasury, trampling the rights of shareholders.

In addition to the giant hedge fund, which is by far the largest non-government owner of common shares of GSEs Fannie Mae and Freddie Mac, numerous individual investors will join the lawsuit. Among these is a 90-year-old widow with 36,000 shares she has owned for more than 20 years.


A spokesman for Pershing Square at Rubenstein Communications, who requested that he not be named in the story, declined comment.

Must Read: Fannie and Freddie Investor Blackstone Also Sought Advisory Role

Pershing Square owns about 63.58 million common shares of Freddie Mac worth $246 million, about four times as many as the next-largest shareholder, Bruce Berkowitz’s Fairholme Capital Management, according to the latest filings compiled by Bloomberg.  Pershing owns some 115.57 million shares of Fannie Mae worth about $448 million, more than 10 times Fairholme’s stake, which again is the next largest. Like many other large investors in Fannie and Freddie, including Perry Capital and The Blackstone Group (BX), Fairholme has a large stake in Fannie and Freddie junior preferred shares. Fairholme has its own lawsuits pending.

In addition to its $189.4 billion senior preferred stake, the U.S. Treasury has warrants to own 79.9% of both Fannie and Freddie common shares. It has not yet exercised the warrants, however.

Treasury spokesman Adam Hodge had no immediate comment.

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