Falcon told Baker that his office issued subpoenas after it "encountered problems" dealing with the company. "Where we have not been satisfied with Fannie's efforts to comply with the subpoenas, we have referred the matter to the Justice Department for enforcement in the courts," Falcon wrote.
OFHEO spokeswoman Russell declined to say when the subpoenas were issued and when they were referred to the Justice Department. A Justice spokesman declined to comment. There has not been any action in the courts, Russell said.
Fannie's board has formed a committee of outside directors to deal with OFHEO's findings and a parallel probe by the SEC. Falcon has told the board that he has doubts about the ability of Fannie's management to correct the problems and change the corporate culture. "I am prepared to act if the board does not," Falcon said in a letter to the directors this week.
Freddie Revises Profit
Freddie Mac yesterday reduced its previously reported 2003 earnings by $75 million as it set up a reserve to cover potential expenses from litigation over billions of dollars of accounting errors and distortions.
The company, which is facing a class-action lawsuit by shareholders, an investigation by the SEC and other legal challenges, reported that it considers a loss from those actions "probable."
The company estimated that the "minimum loss" will be from $75 million to $100 million, and it booked a $75 million reserve as of the second quarter of 2003, when many of the lawsuits were filed.
Michael Cosgrove, a Freddie spokesman, said the company did not record the reserve earlier because it was not able to estimate its potential losses from the litigation.
The reserve lowered 2003 earnings to $4.816 billion from the $4.891 billion the company announced when it belatedly issued its 2003 financial results in June.
In August, the SEC staff notified the company that it may seek a fine as part of contemplated enforcement action, Freddie Mac said in the 2003 annual report released yesterday.
