Exodus Continues at Troubled Fannie Mae
Monday, July 17, 2006
Senior executives at Fannie Mae are heading for the exits two years into a $10.6 billion accounting scandal that has no end in sight.
Last week, the company announced that its chief information officer, Julie St. John, would step down at the end of the year. Deputy general counsel Renie Y. Grohl, a 12-year veteran of Fannie Mae, is leaving in September. Barry Zigas, who was senior vice president for corporate and regulatory housing goals and joined Fannie Mae in 1993, left last month.
The recent departures are part of a steady outflow of top management at the company since federal regulators first determined two years ago that the company botched its accounting.
Since the end of 2004, 44 of the top 55 executive positions at Fannie Mae have changed hands and are now occupied either by people from outside the company or by a handful of insiders who have switched jobs, spokesman Brian Faith said.
Some executives were forced out or left as part of housecleaning efforts in the aftermath of the scandal. But many, such as former senior vice president for investor relations Jayne Shontell and former senior vice president for portfolio transactions Andrew McCormick, have quit.
At least 29 senior executives, including 15 who have left Fannie Mae, are under scrutiny for their possible roles in the accounting manipulation. Some may be forced to return bonus payments based on the faulty bookkeeping, under an agreement Fannie Mae signed with federal regulators in May.
In addition to paying $400 million to settle charges of earnings manipulation with the Securities and Exchange Commission and the Office of Federal Housing Enterprise Oversight, Fannie Mae also agreed to determine whether any of the current and former executives named in OFHEO's report on the accounting scandal should be punished or fired retroactively and forced to return money. OFHEO set a deadline of around October for the company to complete its review.
Neither Fannie Mae nor OFHEO officials would comment on whether any of the recent departures were related to the personnel review. St. John, Grohl and Zigas were not singled out in OFHEO's report or by a second inquiry led by former senator Warren B. Rudman (R-N.H.) at the request of the board of directors.
The Rudman report largely blamed former chief financial officer J. Timothy Howard and former controller Leanne G. Spencer for the accounting mistakes -- allegations that both Howard and Spencer deny -- and faulted former chief executive Franklin D. Raines for fostering a culture that was obsessed with hitting earnings targets and took a fast-and-loose attitude toward accounting rules. Raines denies those charges.
St. John, in a written statement, said she was leaving because it was time for her to consider other opportunities. She will turn 55 in December, making her eligible for early retirement.
Grohl, 56, said in a telephone interview that she had long been planning to take early retirement and delayed her departure by a year out of "loyalty to the company."
Zigas did not return messages left at his home.
The committee set up by the board of directors to lead the personnel review has cleared chief executive Daniel H. Mudd and allowed him to keep his job. But it is still looking at whether to force him to repay bonus payments.
OFHEO found that Mudd attended a 2003 meeting at which earnings management appeared to have been discussed and that he didn't sufficiently look into an employee's complaints about the company's bookkeeping.