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...

Upcoming CPE Webinars

Jul 16
Hand off work to others with finesse and success. Kristen Rampe, CPA will share how to ensure delegated work is properly handled from start to finish in this content-rich one hour webinar.
Jul 17
This webcast will cover the preparation of the statement of cash flows and focus on accounting and disclosure policies for other important issues described below.
Jul 23
We can’t deny a great divide exists between the expectations and workplace needs of Baby Boomers and Millennials. To create thriving organizational performance, we need to shift the way in which we groom future leaders.
Jul 24
In this presentation Excel expert David Ringstrom, CPA revisits the Excel feature you should be using, but probably aren't. The Table feature offers the ability to both boost the integrity of your spreadsheets, but reduce maintenance as well.