Former Freddie Mac CEO to pay millions
The government reached a $16.4-million settlement Tuesday with Freddie Mac’s former chief executive for his role in the mortgage finance company’s multibillion-dollar accounting scandal.
Leland Brendsel, who was ousted in 2003, agreed to pay $2.5 million in fines to the government, give back $10.5 million in salary and bonuses to Freddie Mac and waive claims against the company for compensation worth $3.4 million.
The settlement “represents a satisfactory conclusion to the enforcement actions” against Freddie Mac, said James B. Lockhart, director of the Office of Federal Housing Enterprise Oversight.
The office, which regulates Freddie Mac and its government-sponsored sibling, Fannie Mae, filed civil charges against Brendsel in December 2003. Under the settlement reached Tuesday, the salary and bonus money returned by Brendsel will be used to assist homeowners at risk of foreclosure.
Brendsel’s attorney, Kevin M. Downey, said Brendsel agreed to the settlement “because it requires that most of the money paid will be used to assist families who are threatened with the loss of their homes” in the current mortgage market crisis. Brendsel denied the government’s allegations that he created a corporate culture that allowed the accounting lapses to occur.
Freddie Mac announced in June 2003 that it had misstated earnings by $5 billion between 2000 and 2002 -- artificially inflating results in some periods while reducing them in others -- as a way to smooth out quarterly volatility and meet Wall Street expectations.
The company’s top executives were ousted. The events shocked Wall Street, where Freddie Mac, the nation’s second-largest buyer and guarantor of home mortgages, had enjoyed a reputation as a steady performer and reliable corporate player.
A year later, massive accounting problems were found at Fannie Mae, and that company’s chief executive, Franklin Raines, also was forced out.
Freddie Mac paid a $125-million civil fine in 2003 to settle the accounting lapse case and in September it agreed to pay a $50-million fine to settle related civil securities fraud charges.
