In their first public response to regulators' allegations that the company manipulated its books, executives of mortgage funding giant Fannie Mae plan to defend its accounting and say the actions regulators have criticized involve interpretations of complicated rules.

"These accounting standards are highly complex and require determinations over which experts often disagree," Fannie Mae chairman and chief executive Franklin D. Raines says in written testimony prepared for delivery at a congressional hearing today and made available to The Washington Post.

Some of the regulators' findings "involve highly detailed issues that I would not normally focus on in my role as CEO," Raines says.

Raines says the company strongly disagrees with the allegation that it willfully violated accounting rules to maximize executive bonuses in 1998, according to the testimony.

"What we want to demonstrate is that we intended to do the right thing and we took care to do the right thing," Raines says.

Some of the accounting involved inherently imprecise estimates of the way consumers would respond to changes in interest rates, Raines says. "Given these imprecisions, Fannie Mae decided to use a range of possible outcomes."

In a report last month, regulators said Fannie manipulated its accounting to present a stable pattern of earnings and tolerated weak internal controls to obscure manipulations. In 1998, regulators alleged, Fannie improperly delayed booking $200 million of expenses, enabling Raines and other top executives to receive their maximum bonuses, a total of $27.1 million.

As a matter of policy, Fannie allowed itself considerable discretion to postpone some of its income or expenses each fiscal quarter, the regulators said.

The Office of Federal Housing Enterprise Oversight, Fannie's primary regulator, blamed Fannie's corporate culture and questioned the ability of Fannie's management to correct the problems. The agency accused Chief Financial Officer J. Timothy Howard of providing inadequate oversight and wearing multiple hats that contributed to a breakdown of checks and balances.

Along with presiding director Ann McLaughlin Korologos and OFHEO Director Armando Falcon Jr., Raines and Howard are scheduled to testify today before the House capital markets subcommittee.

In prepared testimony, Howard says he believed Fannie's accounting was within the rules. "All of my judgments regarding accounting issues were made in openness and good faith, with the goal of providing investors with the most meaningful and understandable information possible," Howard says.

Raines's testimony says Fannie's auditor, KPMG LLP, concurred with Fannie's accounting and has not withdrawn its support. He says that before he certified the financial statements, they were reviewed by dozens of people inside the company.

Fannie faces investigations by the Justice Department and the Securities and Exchange Commission and litigation by shareholders. In an agreement with OFHEO, it committed to change its accounting methods going forward. Whether it must also correct its past financial statements will be determined by the SEC.

For Raines and Howard, the stakes go beyond keeping their jobs. Executives can face fines and prison for knowingly or willfully certifying false financial statements, and they can be compelled to give back incentive pay and gains from stock sales if past financial statements require correction.

In 2002, against the backdrop of the accounting scandal at Enron Corp., Raines appeared before the committee as a spokesman for the cause of good corporate governance.

"It is wholly irresponsible and unacceptable for corporate leaders to say they did not know or suggest it was not their duty to know about the operations and activities of their company," Raines testified on behalf of the Business Roundtable, a group of chief executives of large corporations.

In prepared testimony, Falcon tells a different story: "Fannie understood the rules and simply chose not to follow them."

Falcon also says that auditor KPMG disagreed with Fannie Mae on the 1998 accounting that enabled executives to collect full bonuses instead of none.