Former Freddie Mac CEO Settles Civil Case

From the Associated Press
The government today reached a $16.4 million settlement 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 milion in fines to the government, give back $10.5 million in salary and bonuses to Freddie Mac and to waive claims worth $3.4 million against the company.

The Office of Federal Housing Enterprise Oversight, which regulates Freddie Mac and its government-sponsored sibling, Fannie Mae, filed civil charges against Brendsel in December 2003.

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 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.

McLean-based 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, Freddie Mac agreed to pay a $50 million fine to settle civil securities fraud charges federal regulators brought in connection with the accounting lapse. In addition, four former Freddie Mac executives other than Brendsel settled negligent conduct charges by agreeing to pay a total of $515,000 in civil fines and to make restitution totaling $275,548.

Brendsel's attorney Kevin M. Downey could not immediately comment.

By Mike Shepard  |  November 6, 2007; 4:38 PM ET  | Category:  Freddie Mac
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