CORPORATE CRIME REPORTER
Freddie
Mac to Pay $50 Million Fine to Settle SEC Fraud Charges
21 Corporate Crime Reporter 38, September 27, 2007
The Federal Home Loan Mortgage Corporation – Freddie Mac – will pay a $50 million fine to settle charges fraud charges brought by the Securities and Exchange Commission (SEC).
The SEC alleged that Freddie Mac deceived investors about its true performance, profitability, and growth trends.
The SEC alleged that Freddie Mac misreported its net income in 2000, 2001 and 2002 by 30.5 percent, 23.9 percent and 42.9 percent, respectively.
And Freddie Mac's senior management exerted consistent pressure to have the company report smooth and dependable earnings growth in order to present investors with the image of a company that would continue to generate predictable and growing earnings.
“As has been seen in so many cases, Freddie Mac's departure from proper accounting practices was the result of a corporate culture that sought stable earnings growth at any cost," said SEC enforcement chief Linda Chatman Thomsen.
The SEC also charged four former executives – Freddie Mac President David W. Glenn, CFO Vaughn A. Clarke, and former senior vice presidents Robert C. Dean and Nazir G. Dossani.
Glenn was represented by James Schropp and Daniel Loeb of Fried Frank.
Clarke was represented by Steve Salky of Zuckerman Spaeder.
Dosssani was represented by Deborah Meshulam and Sara Moghadam of DLA Piper.
Harris was represented by Thomas Connolly and Pat O'Donnell of Harris, Wiltshire & Grannis.
Freddie Mac was represented by Hyacinth Kucik, deputy general counsel of Freddie Mac.
SEC officials said that Freddie Mac's violations were the direct result of a corporate culture that placed great emphasis on steady earnings, and a senior management that fostered a corporate image that was touted as "Steady Freddie" to the marketplace.
The four former executives, who were charged with negligent conduct, settled the case without admitting or denying the allegations.
Glenn will pay a $250,000 civil penalty and $150,000 in disgorgement.
Clarke will pay a $125,000 civil penalty and $29,227 in disgorgement.
Dossani will pay a $75,000 civil penalty and $61,663 in disgorgement.
And Dean will pay a $65,000 civil penalty and $34,658 in disgorgement.
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