Freddie Mac Settle SEC Charges

The Wall Street Journal reports:

Freddie Mac will pay a $50 million penalty as part of a long-awaited settlement with the Securities and Exchange Commission regarding allegations of earnings management and accounting fraud at the federal mortgage giant.

Freddie, formally known as the Federal Home Loan Mortgage Corp., settled without admitting or denying the SEC's claims that it deceived investors about its performance over a period of years, smoothing earnings to portray itself as "Steady Freddie." The SEC said the $50 million fine will be distributed to injured investors.

"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," SEC enforcement division director Linda Thomsen said in a statement. "Investors do not benefit when good corporate governance takes a back seat to a single-minded drive to achieve earnings targets."

Freddie's former president, chief operating officer and vice chairman David Glenn, former chief financial officer Vaughn Clarke, and former senior vice presidents Robert Dean and Nazir Dossani also settled with the SEC without admitting or denying charges of negligent conduct.

The SEC said Mr. Glenn agreed to pay a $250,000 penalty and return $150,000 of allegedly ill-gotten gains. Mr. Clarke will pay a $125,000 civil penalty and return $29,227. Mr. Dossani will pay a $75,000 penalty and agreed to forego $61,663, while Mr. Dean will pay a $65,000 penalty and disgorge $34,658.

We wonder if Freddie Mac's fraud squad is going to do some jail time over this.Don't hold your breath though,because Freddie Mac knows more about buying politicians than the housing market.No word yet from Barney Frank or Chris Dodd on this one.