Former Fannie Mae executives face civil charges over alleged accounting fraud

[JURIST] The Office of Federal Housing Enterprise Oversight (OFHEO) [official website] filed a notice of charges [PDF text; press release, PDF] Monday against three former Fannie Mae [official website] executives over their role in fraudulently reporting future earnings so that top executives would receive maximum performance bonuses. The action was taken against former Chairman and CEO Franklin D. Raines, former Vice Chairman and CFO J. Timothy Howard and former Senior VP and Controller Leanne G. Spencer based on allegations the three "improperly manipulated earnings to maximize their bonuses, while knowingly neglecting accounting systems and internal controls, misapplying over twenty accounting principles and misleading the regulator and the public." The OFHEO is seeking over $100 million in fines and disgorgement of bonuses in an amount over $115 million, among other penalties. Bloomberg has more.

The US Justice Department said in August that it had discontinued its two-year investigation [JURIST report] into the government-sponsored mortgage dealer, though the department left open the possibility of prosecutions against individual employees in connection to the alleged accounting fraud. In May, the US Securities and Exchange Commission and the OFHEO announced a $400 million settlement [JURIST report] with the company over violations of the reporting and accounting provisions of the Securities Exchange Act of 1934 [text] and anti-fraud provisions of the Securities Act of 1933 [text].



 

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