[JURIST] Former Fannie Mae [corporate website] CEO Franklin Raines has agreed to pay $24.7 million [press release] to settle a civil lawsuit [JURIST report] brought by the Office of Federal Housing Enterprise Oversight (OFHEO) [official website], OFHEO said Friday. In 2006, OFHEO filed the lawsuit [PDF text; press release, PDF] against Raines, former Vice Chairman and CFO J. Timothy Howard, and former Senior VP and Controller Leanne G. Spencer based on allegations that the three "improperly manipulated earnings to maximize their bonuses, while knowingly neglecting accounting systems and internal controls." Howard and Spencer also settled for $6.4 million and $275,000 respectively. AP has more.

In October 2004, the US Department of Justice (DOJ) began an investigation into whether Fannie Mae broke accounting rules to smooth earnings and boost executive bonuses; the DOJ dropped [JURIST reports] the investigation in August 2006. In May 2005, Fannie Mae settled for $400 million [JURIST report] with regulators at the Securities and Exchange Commission and OFHEO for fraudulently reporting future earnings so that top executives would receive maximum performance bonuses. A derivative lawsuit filed by shareholders, which sought to force former executives and board members involved in the scandal to repay their bonuses and severance packages to the corporation, was dismissed [JURIST report] in June 2007.