Freddie Mac 2014 Annual Report Download - page 52

47 Freddie Mac
underserved populations. For example, we may purchase loans that offer lower expected returns on our investment and
potentially increase our exposure to credit losses. Doing so could cause us to forgo other purchase opportunities that we would
expect to be more profitable. If our current efforts to meet the goals and subgoals prove to be insufficient, we may need to take
additional steps that could potentially adversely affect our profitability. FHFA has not yet published a final rule with respect to
our duty to serve underserved markets. However, it is possible that we could also make changes to our business in the future in
response to this duty. If we do not meet our housing goals or duty to serve requirements, and FHFA finds that the goals or
requirements were feasible, we may become subject to a housing plan that could require us to take additional steps that could
potentially adversely affect our profitability.
We are involved in legal proceedings that could result in the payment of substantial damages or otherwise harm our
business.
We are a party to various claims and other legal proceedings. We also have been, and in the future may be, involved in
government investigations and regulatory proceedings and IRS examinations. In addition, certain of our former officers are
involved in legal proceedings for which they may be entitled to reimbursement by us for costs and expenses of the proceedings.
We may be required to establish reserves and to make substantial payments in the event of adverse judgments or settlements of
any such claims, proceedings, investigations or examinations. Any legal proceeding, governmental investigation, or IRS
examination issue, even if resolved in our favor, could result in negative publicity or cause us to incur significant legal and
other expenses. Furthermore, the costs (including settlement costs) related to these legal proceedings and governmental
investigations and examinations may differ from our expectations and exceed any amounts for which we have reserved or
require adjustments to such reserves. These various matters could divert management’s attention and other resources from the
needs of the business. In addition, a number of lawsuits have been filed against the U.S. government relating to conservatorship
and the Purchase Agreement that could adversely affect us. See “LEGAL PROCEEDINGS” and “NOTE 17: LEGAL
CONTINGENCIES” for information about these various pending legal proceedings.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our principal offices consist of four office buildings we own in McLean, Virginia, comprising approximately 1.3 million
square feet.
ITEM 3. LEGAL PROCEEDINGS
We are involved as a party to a variety of legal proceedings arising from time to time in the ordinary course of business.
See “NOTE 17: LEGAL CONTINGENCIES” for more information regarding our involvement as a party to various legal
proceedings.
Litigation Against the U.S. Government Concerning Conservatorship and the Purchase Agreement
Between June and September 2013, and in February 2014, a number of lawsuits were filed against the U.S. government
and, in some cases, the Secretary of the Treasury and the then Acting Director of FHFA. These lawsuits challenge certain
government actions related to the conservatorship (including actions taken in connection with the imposition of
conservatorship) and the Purchase Agreement. Several of the lawsuits seek to invalidate the net worth sweep dividend
provisions of the senior preferred stock, which were implemented pursuant to the August 2012 amendment to the Purchase
Agreement. These cases were filed in the U.S. Court of Federal Claims, the U.S. District Court for the District of Columbia,
and the U.S. District Court for the Southern District of Iowa. It is possible that additional similar lawsuits will be filed in the
future.
On September 30, 2014, the U.S. District Court for the District of Columbia entered an order dismissing all but one of the
cases in that Court. The plaintiffs subsequently filed notices of appeal of the Court’s decision. In addition, on October 31, 2014,
the plaintiffs in the one remaining case filed a notice of voluntary dismissal.
On February 3, 2015, the U.S. District Court for the Southern District of Iowa entered an order dismissing the case in that
Court.
Freddie Mac is not a party to any of these lawsuits. However, a number of other lawsuits have been filed against Freddie
Mac concerning the August 2012 amendment to the Purchase Agreement. See “NOTE 17: LEGAL CONTINGENCIES —
Litigation Concerning the Purchase Agreement” for information on the lawsuits filed against Freddie Mac. Pershing Square
Capital Management, L.P. (“Pershing”) is a plaintiff in one of the lawsuits filed against Freddie Mac. Pershing has filed reports
with the SEC, most recently in March 2014, indicating that it beneficially owned more than 5% of our common stock. We do
not know Pershing's current beneficial ownership of our common stock. For more information, see “SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS — Security
Ownership.”
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