Freddie Mac has agreed to help try to recover tens of millions of dollars collected by former chief executive Leland C. Brendsel and former chief financial officer Vaughn A. Clarke as they were ousted over accounting problems at the housing finance company.
In a consent agreement with the Office of Federal Housing Enterprise Oversight, the company agreed to cooperate with OFHEO as it pursues a two-year-old case to collect more than $33 million from Brendsel and nearly $4 million from Clarke.
"This settlement with the company is a significant step forward and allows us to focus our resources on the cases against former officers," said Stephen A. Blumenthal, OFHEO's acting director .
Brendsel was forced to retire and Clarke resigned in June 2003, several months after Freddie said it had violated accounting rules and would restate about $4.5 billion in earnings. But they received severance pay.
In December 2003, OFHEO issued its report on the accounting irregularities at Freddie, and the company agreed to pay a fine of $125 million to settle charges that it manipulated earnings. Separately, OFHEO filed additional administrative charges against Brendsel and Clarke, individually, and against the company to force it to retroactively fire the two executives. Brendsel and Clarke would not have been entitled to the same severance pay if they had been fired.
As part of the agreement announced yesterday, Freddie agreed to cooperate with OFHEO in its efforts to have Brendsel and Clarke retroactively terminated. The company agreed to turn over to OFHEO within 30 days the names and addresses of present and former Freddie employees who might have information relevant to OFHEO's case against Brendsel and Clarke. The company said it would also provide the agency with documents it has had to produce in the numerous shareholder lawsuits it is facing, and explain what documents it has had to hunt down for federal investigators.
OFHEO could file similar charges against former executives with Fannie Mae, Freddie's larger rival, which ousted chief executive Franklin D. Raines and chief financial officer J. Timothy Howard after federal regulators ordered the company to restate $10.8 billion in previously reported earnings as a result of accounting violations. Raines, for example, retired and is entitled to receive a pension of more than $1 million a year plus stock options. But OFHEO would not likely file such charges before it completes its final report on Fannie, which an agency spokeswoman said is scheduled to come out next year.