Mortgage lending giant Freddie Mac said yesterday that banking industry veteran Eugene M. McQuade will be its next president and chief operating officer, the latest in a series of management changes over the last 18 months in the wake of the McLean-based company's ongoing $5 billion accounting problems.
McQuade -- a former FleetBoston Financial Corp. executive who helped orchestrate that firm's merger with Bank of America in April -- will assume his new position Sept. 1. He was handpicked by Freddie Mac chairman and chief executive Richard F. Syron, 60, himself a newcomer to the company. Syron took over in January after the two previous chief executives were forced to resign for their roles in the accounting problems.
The president's job has been vacant for 15 months, ever since Freddie Mac's former president and chief operating officer, David Glenn, was fired for failing to cooperate with attorneys hired by the company to investigate accounting errors. McQuade will take over from Paul T. Peterson, who has been at the company 15 years but only moved into the chief operating position 15 months ago, when Glenn departed.
The plan is for McQuade to take over from Syron as chief executive in three years, the two men said in an interview yesterday.
The company said that Peterson, 54, will retire next year, staying on until then to help with the transition. Sources familiar with the change say that Peterson was replaced in his job both because he would not commit to staying for the duration of Syron's tenure and because Syron wants to move his own people into position.
The company misreported earnings by $5 billion in financial disclosures from 2000 to 2002, which led to a federal civil fine of $125 million. The necessary corrections caused Freddie Mac to fall behind in its financial statement reporting with the U.S. Securities and Exchange Commission. The company reported 2003 results in June and expects to report 2004 numbers next year.
Syron has said repeatedly that attracting new managers and publishing financial statements on time are key to restoring trust in the company. Freddie Mac is a government-sponsored enterprise, which means it is congressionally chartered but publicly traded. Congress created it to buy mortgages from lenders, a process that increases the supply of cash for home loans.
McQuade, a certified public accountant by training, became president of Bank of America Corp. after its merger with FleetBoston, but stepped down June 30, three months after the deal was completed. McQuade and Syron said they began talking at about that time and reached an agreement quickly, by July 4. It has taken a month to write up a formal contract and to obtain approval from the board and federal regulators.
Freddie Mac's directors will vote McQuade onto the board at a meeting in November, Syron said. If McQuade takes over as chief executive in 2007 as planned, Syron would remain chairman for another 18 months until the end of his five-year contract with the company, he said. Whether McQuade will become chairman at that time is undecided, McQuade and Syron said.
McQuade joins the company at a tumultuous time. Critics in Congress, the White House and private industry say Freddie Mac and its larger twin and rival, Fannie Mae, are too big and need to be reined in, efforts the company is fighting. McQuade and Syron said they welcome the challenge. "No one here wants to be bored. We haven't been, and we don't expect to be," Syron said.