Freddie Mac pays $50M to settle fraud charges

WASHINGTON -- The Securities and Exchange Commission announced the settlement Thursday. McLean, Va.-based Freddie Mac neither admitted nor denied wrongdoing in the accord but did agree to refrain from future violations of the securities laws.

Four former Freddie Mac executives settled the SEC's negligent conduct charges by agreeing to pay a total of $515,000 in civil fines and to make restitution totaling $275,548. They are former president and chief operating officer David Glenn, ex-chief financial officer Vaughn Clarke, and former senior vice presidents Robert Dean and Nazir Dossani.

"We take these charges seriously, and that's why the Freddie Mac of today is a very different company than the Freddie Mac of the past," said Richard Syron, Freddie Mac's chairman and chief executive officer.

An accounting scandal erupted at the government-sponsored company in June 2003 when it disclosed that it had misstated earnings by some $5 billion — mostly underreported — for 2000-2002 to smooth quarterly volatility in earnings and meet Wall Street expectations.

The company's top executives — Glenn, Clarke and then-chairman and chief executive Leland Brendsel — were ousted. The events shocked Wall Street, where Freddie Mac, the nation's second-largest buyer and guarantor of home mortgages, long had enjoyed a reputation as a steady performer and reliable corporate player.

Freddie paid a then-record $125 million civil fine in 2003 in a settlement with the Office of Federal Housing Enterprise Oversight, which blamed management misconduct for the faulty accounting.

In September 2004, an equally stunning accounting scandal came to light at No. 1 mortgage finance company Fannie Mae. Regulators eventually imposed limits on the two companies' multibillion-dollar mortgage debt holdings, which they have been seeking to have lifted as a way to provide cash to the mortgage market in the recent turmoil.