Posted on: Friday, December 19, 2003
2 former Freddie Mac executives ordered to pay $8.4M
By Thomas A. Fogarty
USA Today
U.S. regulators yesterday fined former Freddie Mac CEO Leland Brendsel $5.8 million for his role in past accounting manipulation at the McLean, Va., mortgage investment giant.
Brendsel stands to lose $34 million from the fine, blocked compensation and bonus repayments. The Office of Federal Housing Enterprise Oversight says Brendsel presided over "improper management of earnings" at the company he left in June.
The agency said it wants Brendsel to repay executive bonuses for 2000 and 2001 totaling $3.8 million. It is attempting to deny payment of millions more from Brendsel's termination agreement.
Also yesterday, OFHEO fined former Freddie Mac CFO Vaughn Clarke $2.6 million. That would bring to $3.9 million Clarke's penalty for accounting manipulated to eliminate volatility from Freddie Mac earnings.
The company has acknowledged that its past accounting practices largely were shaped by a desire to present Wall Street with the illusion of steady earnings.
Neither Brendsel nor Clarke could be reached for comment. The proposed penalties are subject to review by an administrative judge.
According to recent federal court filings, Brendsel and Clarke have failed to comply with subpoenas issued earlier by OFHEO. The agency has asked federal judges to require them to cooperate.
Last week, OFHEO fined Freddie Mac $125 million. The fine was accompanied by a report critical of the company and several executives, including Brendsel, Clarke and former president David Glenn.
In October, Glenn settled with OFHEO. He paid a $125,000 fine and agreed to cooperate with the investigation. Glenn's firing also denied him $13 million in separation payments.
In June, Freddie Mac's board purged management for lapses related to the ongoing revision of previous accounting. The board fired Glenn. Brendsel was permitted to retire, and Clarke was permitted to resign.
The board replaced Brendsel with Freddie Mac veteran Gregory Parseghian. But in August, OFHEO ordered Parseghian's ouster because of his role in setting past accounting policies at the company.
The board recently hired Richard Syron, executive chairman at high-tech equipment maker Thermo Electron, as its new chairman and CEO.
Last month, Freddie Mac added $5 billion to previously reported earnings for three years ended in 2002.
Freddie Mac stock closed yesterday at $55.07, down 19 cents on a day when the broader market surged.
