Unpaid taxes from mega mortgage agencies Fannie Mae and Freddie Mac could inspire DeKalb County officials to be the torchbearer in statewide legal efforts to recoup millions of dollars for numerous counties.
The DeKalb County Board could authorize the filing of a lawsuit at tonight’s regular monthly meeting in hopes of recovering more than $40,000 in unpaid transfer taxes spanning more than five years in which Fannie Mae and Freddie Mac claimed exemptions as a government entity on property purchases and sales.
DeKalb County Clerk John Acardo said the potential haul likely would be much larger. He is looking back at records as old as 10 years ago and would pursue interest on the late payments.
DeKalb County’s lawsuit could serve as a trigger, Acardo said. Other area counties such as Whiteside, Will and Winnebago are already interested in signing on. Acardo expects the potential litigation to become a class-action lawsuit.
“With enough pressure, there could be congressional action or the state Supreme Court could even hear the case,” Acardo said.
Pressure has been mounting against Fannie Mae and Freddie Mac for unpaid taxes, and DeKalb County’s lawsuit would mark the fifth state to seek legal action against the agencies. Florida, Georgia, South Carolina and Michigan have all sued, with a federal judge in Michigan ruling in favor of the state’s treasurers.
The Michigan judge ruled that while the agencies’ federal charters give them exemptions on direct taxes, excise taxes such as those associated with the transfer of property ownership are not exempt. The decision is being appealed.
A question also exists as to whether the agencies are federal institutions for tax purposes because of their status as government-sponsored enterprises. The Michigan judge ruled it would not matter either way because the exemption still would not apply, but cited a Nevada ruling that discounted Fannie Mae as a government institution and labeled it as “essentially a privately owned mortgage banker.”
Acardo said he discovered the problem in late 2011 when he noticed some property reports were missing the transfer taxes. He contacted other county clerks who realized the same problem existed. He attempted to contact Fannie Mae and Freddie Mac for the payments but never heard back.
He said Fannie Mae and Freddie Mac paid the transfer tax in some instances, which shows the inappropriateness of the times they claimed exemptions.
After his failed attempts to recoup the taxes, he sought legal representation with the St. Charles law firm Foote, Meyers, Mielke & Flowers. Although the DeKalb County State’s Attorney’s Office normally represents the county in legal matters, Acardo said a class-action lawsuit of this size would be too daunting for most counties’ state’s attorney’s offices.
The outside legal services will come at no cost to the county because the attorneys will be paid a portion of the award should the county win or nothing in the event of a loss.
DeKalb County State’s Attorney Clay Campbell said he has worked closely with Acardo on the issue and believes retaining outside counsel is a “win-win” for taxpayers.
He said the law firm has strong experience in class-action litigation and the resources to handle multiple counties if they join the suit.
“It’s a lot more effective to join forces,” Campbell said. “Anytime I can farm out some legal services without costing the taxpayers any money, it’s a smart thing to do.”
If you go
What: DeKalb County Board meeting
When: 7:30 p.m. today
Where: DeKalb County Legislative Center, 200 N. Main St., Sycamore