Judge Rejects Raines's Request to Accelerate Trial Date
Thursday, February 8, 2007
A judge yesterday rejected former Fannie Mae chief executive Franklin D. Raines's request that the government be compelled to begin a trial this month on administrative charges that he manipulated the company's earnings.
Accelerating such an extensive case "would be nothing short of an absurdity," administrative law Judge William B. Moran said at a scheduling conference.
Raines had argued that he was entitled to have the proceeding begin within 60 days of the filing of charges, which occurred in December.
The federal agency that filed the charges, the Office of Federal Housing Enterprise Oversight, had proposed a timetable that left the trial date open but gave the parties until nearly the end of this year to file pretrial statements.
Noting that Raines and other former Fannie Mae executives are seeking millions of pages of government documents for use in their defense, the judge said Raines's position was "specious and somewhat disingenuous."
Citing a Supreme Court decision in a previous case, the judge said the statute required that the scheduling conference, not the evidentiary hearing, occur within 60 days of the filing of charges. In future arguments, Moran warned, lawyers in the case should tell the court about case law that runs contrary to their positions.
Kevin Downey, an attorney for Raines, told the judge that if the trial begins this month, the burden on the defense would be comparable to the burden on the regulators. This week, a spokesman for Raines framed the request for a February trial date as an issue of fairness.
District-based Fannie Mae, which was chartered by the federal government to promote housing affordability, recently corrected its books to show that it had overstated past profits by $6.3 billion.
Regulators are seeking to recoup more than $115 million of compensation that they say Raines and two other former executives received while Fannie Mae's financial results were misstated. The regulators also are seeking penalties that could exceed $100 million.
Charged along with Raines are former Fannie Mae chief financial officer J. Timothy Howard and former controller Leanne G. Spencer. They joined Raines in pressing for the trial to begin this month.
"We're ready to go . . . simple as that," David S. Krakoff, an attorney for Spencer, told the judge. "What's really behind OFHEO's position is they're not ready to go . . . and they should be ready to go."
In response to Krakoff's protest, Moran reiterated that calling for a Feb. 16 start date was "really disingenuous," adding, "It's not a fair argument to make."
The judge's ruling yesterday could defer the conclusion of the case until next year.
However, in a second track of their defense strategy, the three former executives are trying to have the case moved out of the administrative law arena and into U.S. District Court. They note that the administrative law judge's role would be to make a recommendation to the OFHEO director, and they say the director, James B. Lockhart III, has prejudged the case.
Speaking from the bench yesterday, Moran said he would be a fair and impartial judge, and he said the OFHEO director can't "willy-nilly ignore" a judge's findings.