Lawsuit Says Former Fannie Chief Tainted Board With Charity

Bloomberg reports:

Former Fannie Mae Chief Executive Officer Franklin Raines used the company's charity to compromise the independence of six current directors at the largest U.S. mortgage finance company, according to a suit filed by shareholders in U.S. District Court in Washington.

Raines dispensed grants exceeding $12 million from the Fannie Mae Foundation to groups such as the Brookings Institution and John F. Kennedy Center, discouraging directors tied to the organizations from challenging policies that led to $10.8 billion in accounting errors, the complaint alleged.
Raines, who was chairman of both the board and the foundation, ``dominated his fellow board members,'' the Feb. 27 filing said. ``In more than 78 board meetings, 48 audit committee meetings and 38 compensation committee meetings, defendants never raised any opposition to Raines, enabling and fostering the perpetuation of his schemes,'' the suit alleged.

The plaintiffs in the case include the Wayne County Employees' Retirement System and Pirelli Armstrong Tire Corp. Retiree Medical Benefits Trust.

As we've said before Fannie is a rather shifty institution.This lawsuit gets into the world of the Fannie Mae Foundation where foundation grants could be perceived as investing in long term image building for Fannie Mae.The fact that the Brookings Institute is being drawn in makes this an even bigger story.We doubt this is the last of the bad news on Fannie Mae.