Earlier versions of the headline on this story incorrectly said that former Freddie Mac officials settled fraud charges. The four former executives settled charges of negligence without admitting or denying wrongdoing.
Freddie Mac, Ex-Officials Settle Charges
Friday, September 28, 2007
Freddie Mac, which previously paid about $540 million in settlements with investors and regulators over its alleged accounting manipulations, yesterday agreed to pay $50 million to settle new charges that its conduct amounted to securities fraud.
In addition, four former executives of the government-sponsored mortgage funding company settled charges of negligence without admitting or denying wrongdoing.
The settlements with the Securities and Exchange Commission came more than four years after Freddie Mac disclosed that it had misstated financial results by billions of dollars. The charges added little if any information to the details of the alleged manipulations spelled out in a 2003 report commissioned by Freddie Mac directors.
As with many other companies, Freddie Mac's improper accounting "was the result of a corporate culture that sought stable earnings growth at any cost," SEC enforcement director Linda Chatman Thomsen said in a news release.
Richard F. Syron, Freddie Mac's chief executive, issued a statement saying that "the Freddie Mac of today is a very different company than the Freddie Mac of the past." The company neither admitted nor denied wrongdoing.
The SEC settlements were $400,000 for former president David W. Glenn, $154,227 for former chief financial officer Vaughn A. Clarke, $136,663 for former senior vice president Nazir G. Dossani and $99,658 for former senior vice president Robert Dean.
Separately, federal regulators are still pursuing administrative charges against former Freddie Mac chief executive Leland C. Brendsel, seeking to recoup millions of dollars in penalties, compensation and other gains.
Yesterday, Freddie's chief regulator, the Office of Federal Housing Enterprise Oversight, revealed that it was no longer pursuing similar charges against Clarke after reaching an agreement with him to testify in its case against Brendsel.
The administrative case against Brendsel is scheduled to advance to a trial-like hearing Oct. 15. The administrative law judge presiding over the case in July denied Brendsel's motion to throw out the case and rejected potentially important defenses.
Brendsel had invoked the fact that, before the accounting issues came to light, OFHEO conducted examinations of Freddie Mac and gave the company favorable reports.
"A defense of finger-pointing at OFHEO will not do," administrative law Judge William B. Moran wrote. "It is a mirror that the Respondent must face," the judge wrote.
An attorney for Brendsel, Kevin M. Downey, declined to comment yesterday.