KPMG Plans Counter Suit of Fannie Mae

KPMG fired back at former audit client Fannie Mae this week, saying it would counter the mortgage giant’s $2 billion negligence and breach of contract lawsuit.

KPMG “will pursue our own claims against Fannie Mae” in the U.S. District Court in Washington, D.C., spokesman Tom Fitzgerald told reporters Tuesday. Fannie Mae filed its lawsuit Tuesday in the Superior Court of the District of Columbia.

Fitzgerald said the issues raised in Fannie Mae's lawsuit “are already pending" in shareholder lawsuits before the federal district court. He did not elaborate on what claims KPMG would make against Fannie Mae, Reuters reported.

The nation’s largest mortgage lending company filed the lawsuit Tuesday in relation to the flawed accounting that led to a $6.3 billion restatement of earnings. The complaint alleges that as auditor KPMG applied more than 30 flawed principles and cost Fannie Mae more than $2 billion in damages, Bloomberg reported.

Fannie Mae fired KPMG two years ago, just a week after the Securities and Exchange Commission (SEC) ordered Fannie Mae to restate more than two years of flawed earnings.

The public got its first look at the government sponsored company's books in two two year’s, when it made the restatement December 6. Cleanup of the accounting mess cost about $1 billion, NPR’s Marketplace reported.

Fannie Mae had overstated its earnings between 2001 and 2004 by $6.3 billion, mostly due to errors in the way it accounted for derivatives. Regulators determined that executives manipulated earnings to meet bonus targets.

Meanwhile, Fannie Mae’s troubles with the SEC and the New York Stock Exchange (NYSE) are not over. While the mortgage giant is restating its earnings for the past five years, it also has until March 15, 2007, to file its 2005 annual report, the NYSE said Tuesday.

The exchange will permit Fannie Mae shares to continue trading if it complies with additional listing requirements in the interim, Bloomberg reported, citing an SEC filing from Fannie Mae.

Fannie Mae is delinquent in filing its 2005 report, which was due March 16, and its quarterly reports for the first three quarters of 2005 and 2006. Fannie Mae said in a telephone call with investors last week that it plans to file its 2005 report within the next nine months.

You may like these other stories...

Here's a CPA who truly walks the walk. On March 15, Frank Ryan, CPA, departed San Diego, California, with plans to be in Ocean City, Maryland, by July 2 to teach a course at the Maryland Association of CPAs’ (MACPA...
When Theodore J. Flynn first joined the Massachusetts Society of CPAs (MSCPA) in 1970, it was a different world and a different profession.  The "Big Eight" were still headquartered in Boston. Vietnam War...
Accountant Rickey Charles Goodrich had it a little too good. Many bean counters would kill to serve as financial guru to the likes of Pearl Jam. Goodrich was hired in 2005, and the following year, he became the CFO of Curtis...

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.