Fannie and Freddie Investor Perry Capital Appeals Case Against Government

Updated from 4:57 with statement from Gibson Dunn attorney Olson.

NEW YORK (TheStreet) -- Perry Capital, a hedge fund and one of the largest holders of preferred shares in Fannie Mae (FNMA) and Freddie Mac (FMCC) has appealed Tuesday's legal decision which dismissed its case against the government and sent tumbling both common and preferred shares in the Government Sponsored Enterprises.

On Tuesday, a U.S. District Court judge threw out four lawsuits claiming the federal government illegally forced Fannie and Freddie to pay the Treasury nearly all of its profits, leaving regular shareholders with nothing. The lawsuits, brought by Perry as well as other shareholders including Fairholme Funds, contended that the so-called "sweep" was a violation of their Fifth Amendment rights against the seizure of private property for public use without just compensation. Several other lawsuits remain outstanding, though investors were stunned by the decision and far less optimistic about their prospects for extracting value from Fannie and Freddie shares.

The appeal was posted online by Investors Unite, a group of Fannie and Freddie shareholders.

A call to Ted Olson, the lawyer for Perry at Gibson Dunn & Crutcher, was returned with an emailed statement from Olson sent by Rob Terra, a spokesman at public relations firm Hamilton Place Strategies.

"The district court's decision overlooks important points of law and improperly resolved key questions of fact based on the government's cherry-picked record. The merits of this case deserve to be heard in court. Today's filing brings us closer to that objective," the statement reads.

Fannie Mae common shares lost 11.18% Thursday, closing at $1.51, down from $2.69 at the close of trading Tuesday before the decision became public. Freddie Mac shares fell more than 21% Thursday to close at $1.48. They closed at $2.64 Tuesday. The Fannie Mae "S" series preferred shares fell 9.4% Thursday to close at $3.76. They close at $9.20 on Tuesday.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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