$FNMA #FANNIEGATE TRANSCRIPTION FROM COURT

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Fairholme Funds, Inc., et al. v. USA 3/31/2015

PROCEEDINGS

(Proceedings called to order at 11:03 a.m.) MR. COOPER: -- Fairholme and others. With me this morning, Your Honor, are Mr. Colatriano -- MR. COLATRIANO: Good morning, Your Honor. MR. COOPER: -- well known to the Court, and Mr. Thompson -- MR. THOMPSON: Good morning, Your Honor. MR. COOPER: -- also well known to the Court. On the phone today is our client, the general counsel of Fairholme, Christine Cubias. THE COURT: And for the United States? MR. DINTZER: Good morning, Your Honor. Kenneth Dintzer for the Department of Justice, representing the United States. And with me at counsel table today, Your Honor, is Gregg Schwind, Elizabeth Hosford, Renee Gerber, and Anthony Schiavetti. THE COURT: Very good. Thank you so much. MR. DINTZER: Thank you, Your Honor. THE COURT: Well, before we begin this morning, I advise the parties of some troubling activity that wanted to has occurred that in no way involves your clients. It’s troubling to the Court because there is the specter that’s -- that may have been raised that there may be some unscrupulous For The Record, Inc. (301) 870-8025 - www.ftrinc.net - (800) 921-5555 ?4 Fairholme Funds, Inc., et al. v. USA 3/31/2015 1 people that might be trying to prey on investors. I don’t 2 know if that’s, in fact, the case or not, but I will just let 3 you know what happened yesterday. 4 Faxed to our Court, to nearly every judge on this 5 Court and special master, was a 38-page document. It’s 6 rambling, largely incoherent. It references today’s status 7 conference, the case number, the conservatorship, FHFA, the 8 Department of Treasury, the network sweep, the housing -- 9 well, HERA. The document also references King James I, as 10 well as the First Charter of Virginia from 1606, quotes from 11 the Holy Bible, Franklin and Eleanor Roosevelt, and double- 12 entry bookkeeping. The individual who sent these -- this -- 13 responsible for the mass faxing refers to herself as the 14 “revocable living trust.” I’ve seen that in a number of tax 15 cases with sovereign citizen cases. I don’t know if she’s 16 part of that or not. I have no idea. 17 But, one, it was troubling to have this mass fax 18 nonsense going on, but upon further investigation, I’ll just 19 say, by my law clerk, as it turns out there is -- now, I 20 don’t know whether these articles are accurate or whether 21 they’re -- just something appears in cyberspace doesn’t mean 22 it’s accurate, but there are articles that appear online that 23 claim that the individual with the identical name to the 24 person who sent the fax was involved in a number of 25 confidence schemes and one Ponzi scheme. And I don’t know For The Record, Inc. (301) 870-8025 - www.ftrinc.net - (800) 921-5555 ?5 Fairholme Funds, Inc., et al. v. USA 3/31/2015 1 whether it originated out of Canada, but it targeted U.S. and 2 Canadian investors. 3 Apparently, they were able to bilk, I believe, over 4 600 investors out of their hard-earned money and I would hate 5 to think that any of the stockholders, the shareholders in 6 Fannie and Freddie, are being targeted by unscrupulous 7 people. AllIcansayisif--I’mnotsureifthisisthe 8 public service announcement portion, something that I don’t 9 usually -- I’ve never engaged in before, if an investor would 10 be contacted by someone who claims that they represent the 11 Court, that those people should know that no one has been 12 retained by this Court to engage in asset recovery. 13 Apparently, part of these other Ponzi schemes, if, 14 in fact, what I read online is accurate, that the individual, 15 again with the same name as the person who sent the fax -- 16 I’m not saying it’s the same person; I’m not even saying any 17 of these articles I read are even accurate -- but someone 18 with the same name apparently claimed to be an expert in 19 asset recovery. 20 So, just people should be cautious about with whom 21 they deal, and we all heard about the Nigerian prince who’s 22 in need of assistance. We’ve all heard about the scams from 23 -- in theory, cold calls from the IRS telling the individual 24 that their -- that they owe the Government X number of 25 dollars and would they please provide their bank account For The Record, Inc. (301) 870-8025 - www.ftrinc.net - (800) 921-5555 ?6 Fairholme Funds, Inc., et al. v. USA 3/31/2015 1 information or they’d even be willing to take a credit card 2 over the phone. 3 So, you have to know who you’re dealing with. You 4 need to be careful, and I just mention that today, just in 5 case there are some citizens here in the courtroom today who 6 may have received either a phone call or otherwise be 7 contacted by this individual. I have alerted the U.S. 8 Marshals. They’re involved; they are investigating this. 9 The phone calls to various chambers yesterday from this 10 individual indicated that it was from a federal office, it 11 had WITS on the caller ID; therefore, a number of the 12 chambers thought it really was someone from the Federal 13 Government contacting them. 14 It was a spoofed caller ID. And, you know, there 15 are ways that people can alter the phone numbers that they’re 16 using so it appears that it’s coming from the IRS or the 17 Federal Government. So, just please be careful with whom you 18 deal. 19 So, I apologize for taking counsel’s time this 20 morning with that, but it was of concern to me. So, I thank 21 you.

MR. DINTZER: Thank you, Your Honor. MR. COOPER: Thank you. THE COURT: I’m ready to begin. MR. COOPER: I think we’re here, Your Honor, this For The Record, Inc. (301) 870-8025 - www.ftrinc.net - (800) 921-5555 ?7 Fairholme Funds, Inc., et al. v. USA 3/31/2015 1 morning on Mr. Schwind’s request, and so perhaps it would be 2 more appropriate for him to open the proceedings. 3 MR. SCHWIND: Thank you, Your Honor, and good 4 morning. What we would like to do is provide the Court today 5 first a general update -- a status update of where we are 6 with discovery and then turn to the issue identified by the 7 parties in the joint status report, having to do with the 8 depositions of government witnesses. 9 As to the status of discovery, the Court extended 10 the period of discovery in this case until the end of June. 11 Since the last status conference on February 25th, document 12 review has continued, and since then, there have been further 13 productions of Treasury and FHFA documents, again, the two 14 agencies that are the focus of document discovery in this 15 case. 16 We have also produced a revised privilege log. In 17 total, just to give the Court an idea of the volume of 18 documents we’re talking about, we have now produced in this 19 case, in this litigation, over 400,000 pages of documents. 20 That’s from FHFA and Treasury combined. We hope to complete 21 our document production in April, and that, of course, will 22 be pending final resolution of the privilege logs. We’ve 23 agreed with Plaintiffs to produce revised privilege logs 24 every two weeks. We’re going to continue to do that, and 25 we’re making our best efforts to complete those logs by For The Record, Inc. (301) 870-8025 - www.ftrinc.net - (800) 921-5555 ?8 Fairholme Funds, Inc., et al. v. USA 3/31/2015 1 sometime in May. 2 In addition, we have met with Plaintiffs. Your 3 Honor will recall at the last status conference that the 4 Court asked the parties to meet and try to -- 5 THE COURT: You kindly agreed. 6 MR. SCHWIND: -- talk about whether there were any 7 privilege issues that were categorical in nature, that didn’t 8 require a document-by-document review or anything like that 9 or any type of categorical privilege issues that could be 10 briefed while document discovery is ongoing. We’ve done 11 that. The parties have exchanged some ideas on some 12 categorical privilege issues that they believe, again, do not 13 require the type of document-by-document review that would be 14 incredibly time-consuming at this time. 15 That said, we are concerned that a number of what 16 we’ll call sideshow issues raised by Plaintiffs will delay 17 our completion of document discovery and our completion of 18 the privilege logs in this case. And I want to talk about 19 those in conjunction with the second issue, again, the one 20 identified in our joint status report having to do with the 21 depositions of government witnesses. 22 We want to make the Court aware of some potential 23 problems out there, and I think we’ve all been involved in 24 cases where judges have looked askance at us and said why 25 didn’t you tell me about this earlier. So, we’re merely just For The Record, Inc. (301) 870-8025 - www.ftrinc.net - (800) 921-5555 ?9 Fairholme Funds, Inc., et al. v. USA 3/31/2015 1 doing -- we’re trying to make the Court aware so if this does 2 come up later on, we’ve at least tried to solve it up front. 3 First of all, the depositions that Plaintiffs have 4 proposed, and we agreed on dates with them, but these 5 depositions have several elements to them that make them -- 6 that make them premature and potentially disruptive. First, 7 we have not completed our document productions of either FHFA 8 or Treasury documents. Moreover, Fairholme has stated that 9 it intends to challenge many assertions of government 10 privilege in this case. And, of course, if the Court 11 sustains any of those challenges, it may result in the 12 production of additional documents. 13 Now, what this means is that Fairholme intends to 14 depose government witnesses before documents have been 15 produced in this case, and we’ve told Plaintiffs this, point 16 blank. And we’ve told them that we believe these depositions 17 are premature. And, again, we’ve agreed on dates with 18 Plaintiffs, because the Court did allow depositions in its 19 February 26th, 2014, discovery order, and we understand that. 20 We’re not trying to fight that. 21 But what we do have a problem with, and this is why 22 we wanted to bring this to the Court’s attention today, is 23 that assuming these depositions go forward, we’re not going 24 to agree to further depositions of these witnesses should 25 Plaintiffs say, well, oh, now, we have these new documents. For The Record, Inc. (301) 870-8025 - www.ftrinc.net - (800) 921-5555 ?10 Fairholme Funds, Inc., et al. v. USA 3/31/2015 1 2 3 4 5 6 7 8 9 THE COURT: Understood. MR. SCHWIND: And -- and Plaintiffs have not agreed with that. We’ve told them we’re not going to agree, we’re going to move to quash, and Plaintiffs’ response has been, well, we’ll deal with that problem when it happens. THE COURT: No. I agree with you. I’m going to wait to hear what Plaintiffs’ counsel has to say, but it’s -- what’s always been fair is you don’t have to have this kind of piecemeal approach to a deposition, that if a counsel wants to engage in a deposition without having all of the documents, they do so at their peril. It’s one bite at the 10 11 12 apple. 13 It’s one thing if you’re talking about, well, 14 30(b)(6) deponent, you’re trying to find out who is a 15 repository of the -- of documents, if you’re trying to 16 identify additional witnesses down the chain, and that’s a 17 purpose of the deposition, but if the purpose of the 18 deposition is to depose individuals to find out how they’re 19 tied to the specific documents and to get further insights 20 into what transpired, then they get one bite at the apple. 21 They get to take one deposition. 22 MR. SCHWIND: Thank you, Your Honor. And just 23 to -- I won’t dwell on that aspect anymore. 24 THE COURT: Can you explain a little more to me, 25 though, what is -- with these witnesses, what is -- are they For The Record, Inc. (301) 870-8025 - www.ftrinc.net - (800) 921-5555 ?11 Fairholme Funds, Inc., et al. v. USA 3/31/2015

taking a deposition to determine whether or not there are other repositories of information? Is that the purpose of the deposition? Or is it to depose and I’ll hear -- obviously I’ll hear -- get the Plaintiffs’ world view -- but what is your understanding of these depositions? MR. SCHWIND: Well, none of the depositions is a Rule 30(b)(6) deposition. THE COURT: Right. No, I understand that. MR. SCHWIND: First of all, Your Honor. THE COURT: But, I mean, is it -- MR. SCHWIND: Second -- and, secondly, of course, Plaintiffs haven’t disclosed, nor do they necessarily have an obligation to tell us -- THE COURT: Right. MR. SCHWIND: -- all the matters that they want to question the witness on. But the parameters of the depositions, as we understand it, are the Court’s -- are the subjects in the Court’s discovery order. THE COURT: Okay. MR. SCHWIND: That said, our expectation, and we expect this to be accurate, is that this is not, you know, Plaintiffs trying to find out where documents are. One of the witnesses, for example, is one of the signatories to the third amendment. Okay, it’s the former director of the FHFA. There are two other FHFA witnesses, again, whose names are on For The Record, Inc. (301) 870-8025 - www.ftrinc.net - (800) 921-5555 ?12 Fairholme Funds, Inc., et al. v. USA 3/31/2015 1 a number of documents that we’ve produced in this case and 2 that were -- at least one of them was involved with the third 3 amendment; another one was involved in the conservatorship 4 decision back in 2008. So, we expect these to be substantive 5 depositions, not merely depositions of the type Your Honor 6 referred to. 7 THE COURT: The only exception that I would find to 8 what I said would be if at the deposition of another witness 9 if something -- if there would be something unforeseen that 10 would come up, the Plaintiffs could not have anticipated, 11 despite having all the documents they need, that there might 12 be -- there can be grounds for reopening a deposition, but to 13 take multiple depositions of the same individual is -- it’s 14 not fair and it’s not efficient. So, you know, I’ll wait to 15 hear what the Plaintiff has to say. They may have a good 16 explanation as to why they want to go down the road that they 17 do, but I’m just indicating to you what I -- how I would -- 18 how I intend to rule if Plaintiffs cannot give me a good 19 reason as to why they want to engage in this piecemeal 20 approach to deposing a particular witness. 21 MR. SCHWIND: Right. Thank you, Your Honor. And I 22 just want to point out briefly that everything we do is 23 essentially a distraction from our main focus right now, 24 which is document production, which is getting the privilege 25 logs done. And this would be a major interference with our For The Record, Inc. (301) 870-8025 - www.ftrinc.net - (800) 921-5555 ?13 Fairholme Funds, Inc., et al. v. USA 3/31/2015 1 ability to do that. 2 Again, we are trying to work with Plaintiffs, but 3 if they could merely, again, push these out until after we 4 finish those things, again, it would greatly assist our 5 ability -- excuse me -- to complete document production on 6 the schedule that the Court has set out, which is our intent. 7 Thank you, Your Honor. 8 THE COURT: Understood. Thank you. 9 Sorry to be the wet blanket before you even start, 10 Mr. Cooper. 11 MR. COOPER: Well, Your Honor, I think there is 12 some confusion at work here, and I hope I can clear it up. 13 If counsel for the Government is saying that his only concern 14 is that we wait to take any deposition until he completes his 15 document production, which he has said he will complete, and 16 I’ve not heard even today or before today any suggestion that 17 he’s off track here, but that he will complete document 18 production by the end of April. 19 If that -- and that -- and that after that time he 20 will have no concerns about our going forward with 21 depositions in May and in June, because, remember, we have an 22 end-of-June discovery cutoff. Then I -- then I don’t think 23 we’re going to have any disagreement. We’ll be willing to 24 put the depositions that we have scheduled with counsel by 25 agreement, which -- one of which takes place on April 17th, For The Record, Inc. (301) 870-8025 - www.ftrinc.net - (800) 921-5555 ?14 Fairholme Funds, Inc., et al. v. USA 3/31/2015

the other one takes place on April 29th. We’ll be happy to put those over for two weeks or so. THE COURT: Well, let me -- MR. COOPER: But -- THE COURT: Well, let me just ask. Mr. Schwind, will you be able to complete the production of documents as Mr. Cooper has outlined? MR. SCHWIND: The production of documents, Your Honor, but not the -- not the completion of the privilege logs in this case. We still have the issues out there, and, again, if it’s Plaintiffs’ intent to challenge privilege, and if Plaintiffs hope to discover more documents as a result of that privilege challenge process, we think that -- assume we can do that. But the answer to your questions are yes, we do, but we don’t think that solves the problem. THE COURT: Then I understand -- MR. COOPER: There’s the rub. THE COURT: -- and that’s -- well, that’s why I’m going back and forth. And when do you think the privilege log completion -- when do you anticipate completing the privilege logs? I know you said you’re supplementing every two weeks. Was that correct? MR. SCHWIND: Yes, Your Honor. THE COURT: Okay. MR. SCHWIND: We are targeting May. We’ll say end For The Record, Inc. (301) 870-8025 - www.ftrinc.net - (800) 921-5555 ?15 Fairholme Funds, Inc., et al. v. USA 3/31/2015 1 of May. I don’t want to commit to any earlier than that. 2 THE COURT: Okay. Okay, the end of May. All 3 right. And I will -- and I know the last thing you want me 4 to do is to reset the deadline, but rather than have the 5 Plaintiff be penalized by having the clock run out on them, I 6 will enlarge the discovery schedule so that you have the 7 entire universe of documents that you need, that you will 8 have all the privilege logs that you need before you conduct 9 your depositions. I mean, fair is fair. 10 MR. COOPER: Your Honor -- 11 THE COURT: But, again, I know you don’t want to 12 keep pushing out the time. 13 MR. COOPER: There is the further issue that 14 counsel for the Government has raised with us, but which has 15 not come forward clearly yet, and that is, after the document 16 production is complete at the end of April and after we get a 17 nonprovisional final privilege log, which we have been 18 assured is going to contain thousands of documents, after we 19 get that by the end of May, I have little doubt, frankly, 20 that the parties -- that the Plaintiffs are going to dispute 21 some of the claims of privilege. And at that stage, we will 22 have a document-by-document arm wrestle with the Government 23 over that. 24 Our concern is this, Your Honor, and it has been 25 what we, at least, have understood to be the Government’s For The Record, Inc. (301) 870-8025 - www.ftrinc.net - (800) 921-5555 ?16 Fairholme Funds, Inc., et al. v. USA 3/31/2015 1 explicit position, that our depositions should not take 2 place, not only until the end of May and beginning presumably 3 in June with an end of June deadline, which you’ve just said 4 you will relax, but rather that the depositions, as far as 5 the Government is concerned, should not take place until all 6 privilege issues have been resolved. 7 And it is their position, as at least we understand 8 it, that if a deposition takes place before all privilege 9 issues are resolved and the Government feels it necessary to 10 instruct a witness not to answer because of a claim of 11 privilege and we contest that claim and the Court ultimately 12 agrees with us, that we will not have an occasion after that 13 because the Government will preclude our ability to possibly 14 re-empanel that witness and ask that witness about a document 15 that has just now come into our possession that we never had 16 before. 17 Now, the Court opened the hearing by noting that if 18 our purpose in these depositions is to question a witness 19 about a document or about documents and there’s substantive 20 knowledge of the case, on the topics and only the topics that 21 this Court has authorized us to inquire into, we understand 22 that, we accept those restrictions in deposition discovery, 23 no less than in document discovery. But if our purpose is to 24 do that and we don’t have a document because we’ve not waited 25 until the end of document discovery, well, then we’re taking For The Record, Inc. (301) 870-8025 - www.ftrinc.net - (800) 921-5555 ?17 Fairholme Funds, Inc., et al. v. USA 3/31/2015 1 that risk. We understand that. We understand that. We 2 won’t get a second bite at that witness with respect to a 3 document that is produced to us as responsive. 4 But what we can’t accept, Your Honor, and we can 5 find no authority that suggests we ought to accept, the 6 notion that if a deposition is taken before all privilege 7 issues have been resolved, as they almost always are, in my 8 experience anyway, it’s not at all infrequent that claims of 9 privilege come up in depositions. 10 THE COURT: You’re absolutely right. 11 MR. COOPER: Not at all infrequent. And those 12 claims get either resolved by the parties or they get brought 13 to you and you resolve it, and once it’s resolved, then with 14 -- if the party disputing the claim of privilege prevails, 15 some new information comes forward. And then maybe it 16 warrants asking that witness more questions and bringing them 17 back together for that narrow purpose. 18 And, Your Honor, we’re just -- we just want to make 19 sure -- because we understand the Government to take a 20 position contrary to this, we want to make sure that we will 21 not be foreclosed here and now from coming back possibly if 22 nonprivileged information comes into our possession after 23 what we expect to be a lengthy period of disputing on 24 privilege issues. The Government expects and has said in its 25 papers here that it expects that to take months. For The Record, Inc. (301) 870-8025 - www.ftrinc.net - (800) 921-5555 ?18 Fairholme Funds, Inc., et al. v. USA 3/31/2015 1 2 privilege log that we have received, the provisional 3 privilege log, as the Court will recall from our last 4 conference, not even final, we haven’t got a single document 5 or final claim of privilege yet that we could bring to this 6 Court and get this process started, if we disputed it. And 7 maybe we won’t dispute these thousands of documents, but the 8 truth is we know we will because we’ve got 900 provisional 9 claims of privilege, and if they remain, there’s going to be 10 some disputes. 11 But after we get in the end of May thousands of 12 assertions of privilege over documents, we believe we’re 13 going to have meritorious objections to those claims to bring 14 to the Court. And, Your Honor, we do not think it is 15 feasible to delay depositions until all that is done. I know 16 of no precedent for doing that. And if the disputes over 17 privilege yield additional information and it warrants an 18 additional deposition, at least to the Plaintiffs’ mind, and 19 the Government resists, we’ll bring our complaint to you and 20 you’ll either agree with us or you’ll agree with them. But 21 that’s how these things work. 22 THE COURT: Well, just -- well, let me just ask you 23 this. I mean, Mr. Schwind has represented to me that over 24 approximately 400,000 pieces of paper -- I don’t think it’s 25 just been documents. For The Record, Inc. (301) 870-8025 - www.ftrinc.net - (800) 921-5555 We don’t doubt that it will if, in fact, the ?19 Fairholme Funds, Inc., et al. v. USA 3/31/2015 1 MR. SCHWIND: Pages. 2 THE COURT: Pages have been produced. Thank you. 3 Now, I could have a dedicated phone line for the time that 4 you’re going through depositions and you all can have me on 5 speed dial and I can just sit at my desk all day and do 6 nothing but rule on privilege, whether a document is 7 privileged. That doesn’t seem to be terribly -- I understand 8 why the Plaintiff would be anxious to move forward with 9 taking the deposition, but isn’t it cleaner to have all the 10 documents produced and then determine what’s privileged and 11 what’s not by whether you were going seriatim and just taking 12 each document and making that determination where the parties 13 can agree as to what’s privileged and what’s not. 14 The general case, at least in my experience as a 15 litigator, was when a -- it was not unusual to have a 16 document challenged at a deposition as being privileged, but 17 it was more the unusual case -- and it wasn’t that there 18 would be a banker’s box full of documents that were going to 19 be challenged. It might have been one or two, three or four 20 at the most. Maybe that’s just my unique experience. But I 21 never -- it was a rare occurrence that someone would go into 22 a deposition knowing that 45 documents were going to be 23 challenged and they would have to bring it to the judge that 24 day for a ruling. 25 MR. COOPER: And, Your Honor, I -- forgive me, For The Record, Inc. (301) 870-8025 - www.ftrinc.net - (800) 921-5555 ?20 Fairholme Funds, Inc., et al. v. USA 3/31/2015 1 because I didn’t mean to suggest that scenario. The scenario 2 I expect is one in which we will not have those documents, 3 those 45 documents. We will not have them. 4 THE COURT: Right. 5 MR. COOPER: We’ll be taking a deposition, but we 6 will be -- you know, again, the deposition discovery will be 7 delayed a period of months, according to the Government 8 itself, as the parties dispute over the validity of the 9 claimed assertion of privilege, assertions that we can’t 10 bring to you on a categorical basis -- 11 THE COURT: Right. 12 MR. COOPER: -- because the Government and we, you 13 know, can’t -- we’ve only identified -- the Government’s only 14 agreed to one categorical issue that could be resolved by the 15 Court in advance, and that simply isn’t going to narrow the 16 privilege issue. So, that’s off the table. We are -- the 17 parties and the Court, unfortunately, are going to be going 18 through document-by-document assertions of privilege and 19 disputes. 20 And, so, we’d like to take depositions now or 21 promptly anyway, at least after the close of document 22 discovery, when they have said -- they have produced all 23 responsive, nonprivileged documents to us. We have them all. 24 The only thing they’re not producing to us are the privileged 25 ones, the thousands of privileged ones. We’d like to begin For The Record, Inc. (301) 870-8025 - www.ftrinc.net - (800) 921-5555 ?21 Fairholme Funds, Inc., et al. v. USA 3/31/2015 1 depositions because if, again, deposition discovery is 2 delayed until all the disputes are resolved, that would delay 3 depositions months from now. And, Your Honor, that has very 4 real costs to the interests, we believe, in our professional 5 judgment, to our -- to our -- the interest that we’re here to 6 advance, our client’s interest. 7 So, the scenario, Your Honor, will be that there 8 will be documents that we don’t have to question a witness 9 about, but that months later, after a dispute has been 10 resolved and the Court perhaps resolves it favorably to the 11 Plaintiffs, we’ll come into the possession of a document or 12 documents that will then warrant a supplemental deposition to 13 ask the witness about those particular documents, a narrow, 14 focused deposition at that time. But this is not at all 15 unusual. 16 What we are -- you know, we’re hopeful that the 17 Court will not suggest here or advise us, that it’s the 18 Court’s judgment, that if we take a deposition even after 19 document production is complete, but before the drawn-out 20 process of resolving privilege claims has been completed, 21 that any victories we may win in that process will -- will do 22 us no good, at least in the sense that we won’t be able to 23 then potentially seek the Court’s permission to take a 24 supplemental deposition of a witness that we’ve already 25 deposed. For The Record, Inc. (301) 870-8025 - www.ftrinc.net - (800) 921-5555 ?22 Fairholme Funds, Inc., et al. v. USA 3/31/2015 1 THE COURT: What would you be gaining, Mr. Cooper, 2 by -- rather than having the entire universe of documents 3 that you need to depose a witness, what good does it do to 4 move forward with that deposition? 5 MR. COOPER: Your Honor, we are very concerned 6 about the period of time that it has taken -- that’s 7 discovery taken already. We’re at the one-year anniversary 8 of the discovery. We’ve had -- now, we’re on our third 9 extension of time with respect to discovery. It may well be, 10 Your Honor, that the depositions we contemplate taking now, 11 we won’t -- you know, what we can’t know is whether we will 12 find it necessary to come back to the Court and ask for a 13 supplemental deposition because of newly released and 14 disclosed information. 15 And, Your Honor, witnesses’ memories fade and these 16 events, particularly the events with respect to the third 17 amendment 18 witnesses 19 to -- you 20 about the period of time that has taken place. 21 THE COURT: How much -- are -- with every passing day, they’re fading and become unavailable and they become more difficult know, to schedule and we’re becoming very nervous 22 MR. COOPER: One thing I should say, that the 23 depositions that we have now agreed to schedule, the 24 Government has agreed to schedule with us, are depositions 25 that are limited to some FHFA personnel, three FHFA For The Record, Inc. (301) 870-8025 - www.ftrinc.net - (800) 921-5555 ?23 Fairholme Funds, Inc., et al. v. USA 3/31/2015 1 personnel. We identified them after the January 28th, I 2 think, status conference when the Government represented to 3 the Court and to us that FHFA document discovery was very 4 nearly complete, that there would be only one more document 5 production relating to FHFA documents. 6 And, Your Honor, we got a substantial document 7 production with respect to FHFA documents last week, late 8 last week. We assumed that FHFA document production was 9 done. We were informed this morning that that’s not 10 and, in fact, there are going to be more than one -- 11 additional one that, on January 28th, the Government 12 represented was left. And, so, we focused on FHFA personnel 13 because we assumed that we would have the complete document 14 production with respect to FHFA personnel. And the only 15 thing left would be documents that they withheld on a claim 16 of privilege that may or may not come into our possession 17 down the road. 18 So, Your Honor, we -- that sensible process is 19 exactly what occurred to us as well. But we -- again, we are 20 very, very reluctant to delay deposition discovery. I’m put 21 in mind of an exchange -- I’m sure you don’t remember this, 22 but an exchange that you and I had in -- back in July of 23 2014, when we were arguing about the Government’s motion for 24 a protective order and when the Court put in place the order 25 -- the confidentiality requirements that have governed For The Record, Inc. (301) 870-8025 - www.ftrinc.net - (800) 921-5555 the case the one ?24 Fairholme Funds, Inc., et al. v. USA 3/31/2015 1 discovery ever since. But the Court urged me to start taking 2 -- just take depositions. 3 “THE COURT: Well, let me ask you this, with the 4 documents, what about just taking depositions of 5 conservators?” 6 And then I respond, “Well, we’re looking forward to 7 doing that. 8 “THE COURT: Wouldn’t that just resolve it? You 9 wouldn’t have to then ask for any internal documents. I 10 mean, do you get what you need to meet the ripeness 11 argument?” One of the jurisdiction arguments. “And take one 12 at a time, your choice.” 13 I responded, “Yes, but, Your Honor, we do 14 anticipate taking depositions and we’ve identified and the 15 Government has identified individuals to us who have the 16 relevant information in their possession. Before we take a 17 deposition, we believe that the discovery that the Court has 18 authorized is a necessary element of that.” 19 Then the Court responded, “Well, discovery -- 20 obviously, it includes depositions.” 21 So, Your Honor, it’s -- we’ve -- now, it’s nine 22 months after that exchange and, yes, we’ve been anxious to 23 take depositions throughout those nine months. We believe 24 that our interests are being prejudiced now by not taking 25 depositions. And, so, we would like to move forward and we For The Record, Inc. (301) 870-8025 - www.ftrinc.net - (800) 921-5555 ?25 Fairholme Funds, Inc., et al. v. USA 3/31/2015 1 would plan to move forward unless the Court has an objection 2 to it. But, again, we -- we are -- we urge the Court not to 3 foreclose now, in advance, the possibility that the Court 4 might agree down the road that newly produced information 5 would warrant a supplemental deposition. 6 THE COURT: Well, no one has requested that I quash 7 a deposition. It sounds like what you all are looking for is 8 an advisory ruling, which judges don’t provide. But I 9 certainly -- I don’t want to see witnesses inconvenienced. 10 MR. COOPER: Of course not. 11 THE COURT: However, if Plaintiffs can make an 12 argument at a later time as to why they need to -- why it was 13 prudent to take the deposition, because I don’t know whether 14 someone is -- no one has said that any of the witnesses are 15 gravely ill, but if to make sure that memories don’t fade any 16 more than they generally do. I don’t know whether or not you 17 would be able to wrap up the dispute with discovery within 18 just a few months. If you could, it would make sense to 19 perhaps wait on the depositions. If you can’t and it’s going 20 to be an extended time period, then I can understand why you 21 might want to move forward. 22 But since there’s only one of Mr. Schwind and his 23 other colleagues, then I don’t know, given the limited 24 resources they have, whether they can both be conducting 25 depositions and conducting document reviews and producing For The Record, Inc. (301) 870-8025 - www.ftrinc.net - (800) 921-5555 ?26 Fairholme Funds, Inc., et al. v. USA 3/31/2015 1 privilege logs. So, I don’t know. I guess you just have to 2 weigh what you think is best for your client and make the 3 prudent decision. 4 MR. COOPER: Your Honor -- yes, Your Honor, I 5 appreciate that, and that is what we have been -- obviously, 6 our guiding standard from the beginning and today. And, 7 again, if the only thing at work here is postponing the 8 depositions until the end of April when the Government has 9 represented it will have completed document production, then 10 that’s something we can live with. Postponing the 11 depositions until after, you know -- you know, who knows how 12 long of litigating privilege disputes with the Court, that’s 13 something that is going to be very, very hard for us to live 14 with. But, you know, I hear the Court and I really don’t 15 have anything to add to those points. 16 THE COURT: Very good, thank you. 17 MR. SCHWIND: Thank you, again, Your Honor. I just 18 want to respond briefly to Plaintiffs’ assertion that we have 19 stated that the privilege challenge process was going to 20 involve months. We have never said that. In fact, the only 21 thing delaying discovery after May, after we hopefully 22 complete our privilege logs, is Plaintiffs’ challenge to 23 documents. So, it’s not our expectation that the privilege 24 challenge document will take months. It’s really up to 25 Plaintiffs what they choose to make of that process. For The Record, Inc. (301) 870-8025 - www.ftrinc.net - (800) 921-5555 ?27 Fairholme Funds, Inc., et al. v. USA 3/31/2015 1 2 proposing is the norm. We have time in this case to do 3 things in the right order. They haven’t put on any even hint 4 of prejudice, any demonstrated prejudice. We have time to do 5 things in the right order in this case and, again, I think, 6 as Your Honor has suggested, the right order is that 7 Plaintiffs have documents, then they do their depositions, 8 and we go forward after that. So, I just want to make that 9 point again, that how long this process takes, the privilege 10 challenge process is up to Plaintiffs. So, for Plaintiffs to 11 say it’s not fair to make them put off depositions until this 12 process is complete, well, they have control of that process. 13 THE COURT: Well, certainly, what you and Ms. 14 Hosford and Mr. Dintzer, going forward in the privilege logs, 15 I mean, it’s certainly -- it’s not as though Plaintiffs are 16 in the driver’s seat. I mean, they have to review the 17 privilege logs that you provide and then determine what they 18 will challenge or what makes sense to them. 19 So -- but what seems to me, at this stage, is that 20 it makes sense to wait until documents -- the entire universe 21 of documents have been produced and then they can examine the 22 privilege logs and then make a determination of whether or 23 not it’s prudent to move forward. In the ideal world, they 24 would wait and review the privilege logs with you, determine 25 if perhaps you might have been overly conservative in For The Record, Inc. (301) 870-8025 - www.ftrinc.net - (800) 921-5555 So, we don’t think that what Plaintiffs are ?28 Fairholme Funds, Inc., et al. v. USA 3/31/2015 1 documents you’ve designated to be privileged, work out what 2 issues you can, then bring the remaining ones to me. I have 3 confidence that you all can resolve that on your own, but if 4 you need me to become involved, I’m happy to do so. 5 But that’s the ideal world. I don’t know 6 whether -- but, again, I can understand from Mr. Cooper’s 7 perspective that if the process would take another eight 8 months or so, that that’s so far removed from the original 9 time line that the Plaintiffs will be concerned about 10 memories fading. But, you know, again, that’s a decision 11 that each counsel will make on behalf of their client as to 12 what is in their best interest. But I appreciate everything 13 that you and your colleagues have done in moving the case 14 forward and staying on top of the discovery issue. 15 MR. SCHWIND: Thank you, Your Honor. We’ll 16 continue to do so. 17 THE COURT: Thank you. 18 Mr. Cooper? 19 MR. COOPER: Thank you, Your Honor, as will we. 20 Thank you. 21 THE COURT: Okay, very good. Well, thank you very 22 much. I’m delighted that the two sides, while having very 23 differing views of the case certainly, seem to work very well 24 together despite, again, having different world views. But 25 if there’s something else that you think I can assist the For The Record, Inc. (301) 870-8025 - www.ftrinc.net - (800) 921-5555 ?29 Fairholme Funds, Inc., et al. v. USA 3/31/2015 1 parties in doing with regard to resolving any of the 2 privilege disputes, please bring that to me sooner than 3 later. It’s up to Plaintiffs as to how they want to conduct 4 the depositions, you know, what time line. You all are very 5 able counsel. 6 So, I -- and I’m sure you will do what is in your 7 clients’ best interest, and then if the Government has a 8 different world view in terms of whether or not depositions 9 should have been taken at the time they were originally 10 taken, well then, I’ll deal with that when it comes. 11 Hopefully, we won’t go down that road, but whatever you need 12 to do on behalf of your client, I know you will. And 13 whatever you give me to resolve, I will resolve. So, thank 14 you very much and good morning. 18 a.m.) MR. COOPER: Thank you, Your Honor. MR. SCHWIND: Thank you, Your Honor. (Whereupon, the hearing was adjourned at 11:46 For The Record, Inc. (301) 870-8025 - www.ftrinc.net - (800) 921-5555 ?30 Fairholme Funds, Inc., et al. v. USA 3/31/2015

CERTIFICATE OF TRANSCRIBER I, Sara J. Vance, court-approved transcriber, certify that the foregoing is a correct transcript from the official electronic sound recording of the proceedings in the above-titled matter. DATE: 3/31/2015 s/Sara J. Vance SARA J. VANCE, CERT For The Record, Inc. (301) 870-8025 - www.ftrinc.net - (800) 921-5555