Fannie Mae yesterday announced the hiring of Deloitte & Touche LLP as its new outside auditor, two weeks after firing KPMG LLP in the wake of accounting errors that could cost the housing finance company as much as $9 billion in previously posted profit.
Deloitte & Touche is not unfamiliar with Fannie's accounting problems. Deloitte was instrumental in a year-long investigation by Fannie's regulator, the Office of Federal Housing Enterprise Oversight, that uncovered the problems in the fall.
"Their expertise will be critical as we move forward on the company's restatement process," Thomas P. Gerrity, a Fannie director who chairs the board's audit committee, said in a statement. Charles V. Greener, a company spokesman, declined to comment on whether Deloitte's work for OFHEO factored into its selection.
The chief accountant for the Securities and Exchange Commission said last month that Fannie had "developed its own unique methodology" for accounting for complex financial contracts known as derivatives and had misapplied accounting rules for certain expenses.
Fannie's choices were limited. The four major accounting firms are the only ones large enough to handle Fannie as a client. Other than KPMG, Ernst & Young LLP had advised Fannie in its defense of the accounting in question, and PricewaterhouseCoopers LLP is the auditor for Fannie's competitor, Freddie Mac.
Also yesterday, Fannie named senior vice president of corporate strategy Adolfo Marzol as its chief risk officer, a position Fannie is required to create as part of an agreement with OFHEO to improve its internal controls.
