Both Sides on Offense
Washington Post Staff Writer
Monday, January 22, 2007; Page D01
The defense of Franklin D. Raines has begun.
Two years after falling from the height of corporate power and political possibility, the former Fannie Mae chairman and Clinton budget director is waging an all-out legal battle to save his fortune and repair his battered reputation.
  Franklin Raines says he won't get a fair trial from Fannie Mae's regulator (Dennis Cook - AP) |
Accused of complicity in earnings manipulation, Raines last week escalated a counterattack against the federal agency that drove him from power and seeks to strip him of tens if not hundreds of millions of dollars. In an unconventional legal maneuver, Raines sought to move the case to federal court from the jurisdiction of that agency.
He has fielded a defense team that includes Kevin M. Downey of Williams & Connolly, the Washington law firm that represented such embattled figures as Oliver North and Bill Clinton, and Mark Fabiani, an advocate for Clinton during the Whitewater scandal.
Raines's camp had little to say publicly over the past two years during a series of drawn-out investigations of Fannie Mae's multibillion-dollar accounting misstatements. Raines has long declined requests for interviews from The Washington Post. But since regulators filed administrative charges against him in December, his advocates have filed a flurry of papers mapping out the beginnings of a strategy.
Part of it boils down to this: Turn the tables on the accuser.
The lead accuser is James B. Lockhart III, appointed last year by President Bush to head the small federal agency that oversees Fannie Mae. It is the Office of Federal Housing Enterprise Oversight, or OFHEO, that pushed Raines into premature retirement in December 2004, and it is the same agency that could decide whether he must give up a fortune in alleged ill-gotten gains plus penalties.
Attorneys for Raines have accused Lockhart of prejudging the facts and waging "an unrelenting campaign of disparagement" against him. Last week, Raines's attorneys filed a motion in U.S. District Court for the District of Columbia asking the court to bar Lockhart from making the final judgment in the administrative proceeding. To achieve that, Raines wants the dispute moved from the administrative law arena to federal court.
The motion said Lockhart has made a host of critical comments about Raines, including a statement on "The Newshour" with Jim Lehrer that much of Raines's income while chief executive was "basically fraudulently attained." OFHEO has alleged that at least $52 million of the more than $90 million Raines received from 1998 through 2003 was tied to the company's earnings.
The duel between Raines and Lockhart pits a prominent Democrat against a longtime friend of Bush. Before Fannie Mae's accounting problems came to light, Raines was widely mentioned as a potential high-level player in a future Democratic administration. Lockhart and Bush attended prep school together, were fraternity brothers at Yale and overlapped for a year at Harvard Business School. But OFHEO's initial findings against Fannie Mae were issued under Lockhart's predecessor, a Democrat.
Raines is also defending himself in separate litigation brought by Fannie Mae investors, who allege that they lost money when Fannie Mae's stock price fell.
In filings in the shareholder case, Raines has accused OFHEO of sealing evidence that would contradict or undermine its public case against him. He is pressing to get the records made public.
