3 Former Fannie Mae Execs Face Lawsuit

Fannie Mae’s regulator contends in a civil lawsuit that three former executives overstated profits by $6.3 billion to meet earnings targets and boost their bonuses.

The regulator, The Office of Federal Housing Enterprise Oversight (OFHEO), filed a complaint with an administrative law judge on Monday, seeking $215 million from ousted Chief Executive (CEO) Franklin Raines, former Chief Financial Officer (CFO) Timothy Howard and former Controller Leanne Spencer. Attorneys for the former executives denied the charges, calling them politically motivated and “a work of unsubstantiated fiction.”

OFHEO filed 101 charges relating to deliberate filing of misleading financial reports, neglecting internal controls and “misapplying over 20 accounting principles and misleading the regulator and public," Bloomberg News reported. The regulator wants more than $100 million in civil penalties and recovery of more than $115 million in bonuses.

“They submitted six years of misleading and inaccurate accounting statements and inaccurate capital reports that enabled them to grow Fannie Mae in an unsafe and unsound manner.” said OFHEO Director James B. Lockhart, the New York Times reported.

OFHEO may bring similar charges against current and former executives and directors, said Alfred Pollard, OFHEO’s general counsel.

Fannie Mae, the government-chartered mortgage finance company, lost about $30 billion of market value after OFHEO, in September 2004, said the executives used improper reserves and deferred expenses to bolster earnings and trigger larger bonuses. The Securities and Exchange Commission (SEC) and OFHEO fined Fannie Mae $400 million in May.

The administrative law judge will recommend a final decision to the OFHEO director.

You may like these other stories...

Scott London, a former senior audit partner at KPMG LLP, was sentenced to 14 months in federal prison on Thursday for providing inside information about several of his firm’s clients to a friend, who used it to make at...
By Teresa Ambord, Correspondent You'd think a man who masterminded the biggest Ponzi scheme in history would have ice water in his veins. The name Bernard Madoff has become synonymous with investment scams after his...
By Ken Berry In a new case decided by the US Supreme Court, the remnants of a tax shelter partially constructed by wily Texas billionaire Billy Joe McCombs - known informally as "Red" - collapsed like a house...

Already a member? log in here.

Upcoming CPE Webinars

Aug 26
This webcast will include discussions of recently issued, commonly-applicable Accounting Standards Updates for non-public, non-governmental entities.
Aug 28
Excel spreadsheets are often akin to the American Wild West, where users can input anything they want into any worksheet cell. Excel's Data Validation feature allows you to restrict user inputs to selected choices, but there are many nuances to the feature that often trip users up.
Sep 9
In this session we'll discuss the types of technologies and their uses in a small accounting firm office.
Sep 11
This webcast will include discussions of commonly-applicable Clarified Auditing Standards for audits of non-public, non-governmental entities.