Freddie Mac ex-CEO settles accounting scandal charges

[JURIST] Former chairman and CEO of mortgage finance company Freddie Mac [corporate website] Leland Brendsel agreed to a consent decree [press release; stipulation and consent order, PDF] Tuesday to settle administrative charges filed by the Office of Federal Housing Enterprise Oversight (OFHEO) [official website], which maintains government oversight of Freddie Mac and Fannie Mae, in December 2003. Under the consent order, Brendsel will pay a $2.5 million fine to the US government, and disgorge previously paid salary and bonuses of $10.5 million to Freddie Mac. Brendsel, who is not permitted to work for Freddie Mac in the future without OFHEO permission, has also agreed to waive civil claims he filed against Freddie Mac for the payment of $3.4 million in back compensation. The OFHEO administrative enforcement action against Brendsel stemmed from accounting violations, including "allow[ing] improper earnings management to develop, fail[ing] to ensure that adequate internal controls were put in place and permitt[ing] the accounting function to operate without adequate resources." According to OFHEO director James B. Lockhart, Brendsel fostered a culture at Freddie Mac that supported the accounting violations and contributed to the company's declining performance and misstatement of billions of dollars of revenue.

Freddie Mac was chartered by Congress in 1970 to stabilize the mortgage market. In September 2005, Freddie Mac settled [JURIST report] OFHEO charges with a $125 million fine payable to the US government. As part of the settlement, Freddie Mac agreed to cooperate with the regulatory agency's investigation into Brendsel. The Wall Street Journal has more. The Washington Business Journal has additional coverage.



 

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