By MARCY GORDON
The Associated Press
Wednesday, June 14, 2006; 6:56 PM

WASHINGTON -- A senior House lawmaker has asked the Justice Department to investigate whether Fannie Mae's then-chief executive and finance chief lied to Congress in sworn testimony in 2004.

Rep. Richard Baker, R-La., chairman of the House panel that oversees the government-sponsored mortgage finance company, disclosed Wednesday that he had made a perjury referral regarding former Fannie Mae chief executive Franklin Raines and former chief financial officer Timothy Howard.

The department has been conducting a criminal investigation of Washington-based Fannie Mae, the largest financer and guarantor of home mortgages in the country.

The company's $11 billion accounting scandal came to light in September 2004. Federal regulators found serious accounting problems and alleged that there was a pervasive pattern of earnings manipulation and lax internal controls. The next month, Raines and Howard testified at a hearing before Baker's panel, the House Financial Services subcommittee on capital markets.

They were asked about an episode in 1998 in which Fannie Mae was said to have improperly put off accounting for $200 million in expenses to future periods so that executives could collect $27 million in bonuses.

Raines testified that "there was no decision made" to defer the accounting for expenses. Howard and Raines both denied that they made accounting decisions with the aim of hitting earnings targets to ensure they received full bonuses.

"It is my belief that Mr. Franklin Raines and Mr. Timothy Howard, while testifying under oath ... on Oct. 6, 2004, failed to testify truthfully, in violation of applicable law," Baker said in a letter dated Tuesday to Kenneth Wainstein, the U.S. attorney for the District of Columbia.

"I request that the Department of Justice conduct an investigation and bring any appropriate prosecution," Baker wrote.

Attorneys representing Raines and Howard did not immediately return telephone calls Wednesday.

The two executives were swept from office by Fannie Mae's board in December 2004.

Baker first raised accusations of lying by Raines at a hearing last week. The lawmakers said that in light of information in a new report by the regulators, "there seems to be clear evidence to my mind that Mr. Raines perjured himself."

Also at that hearing, the regulator who oversees Fannie Mae blamed Raines and other senior company officials for accounting failures and alleged manipulations designed to enrich executives.

As a huge housing finance company chartered by Congress, "Fannie Mae has a special mandate and position of public trust. The previous management team, led by chairman and chief executive officer Franklin Raines, violated that trust," said James B. Lockhart, acting director of the Office of Federal Housing Enterprise Oversight.

Raines, who was a White House budget director in the Clinton administration, earned $90.1 million from 1998 to 2003, according to the regulators. That total included $52 million in bonuses tied to the company hitting earnings targets. Howard made $30.1 million during the same period, including $16 million in bonuses linked to quarterly earnings targets.

They are among 30 current and former Fannie Mae executives and employees who are being reviewed for possible disciplinary action, termination or forfeiture of their bonuses. The current president and chief executive, Daniel Mudd, also is under review.

Raines' lawyer, Robert Barnett, said last month that "Mr. Raines has repeatedly stated that he never authorized, encouraged or was aware of violations of generally accepted accounting principles at Fannie Mae for the purpose of smoothing earnings, reaching bonus targets or for any other improper reason. The facts on the record and conclusions from previous reports support this statement."

Channing Phillips, spokesman for the U.S. attorney, said the office was reviewing Baker's request.

Fannie Mae was fined $400 million, one of the largest civil penalties ever in an accounting fraud case, in a settlement last month with its regulators and the Securities and Exchange Commission. The company also agreed to temporarily cap its mortgage holdings at $727 billion.

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On the Net:

Fannie Mae: http://www.fanniemae.com

Rep. Richard Baker: http://www.baker.house.gov

Justice Department: http://www.usdoj.gov

Office of Federal Housing Enterprise Oversight: http://www.ofheo.gov

Securities and Exchange Commission: http://www.sec.gov