U.S. files civil charges against ex-Fannie Mae chief, other executives

12/18/2006

WASHINGTON The government today filed civil charges against former Fannie Mae chief Franklin Raines and the mortgage giant s former finance chief and controller, seeking fines and the return of millions in bonus money said to be tied to an improper accounting scheme.

The Office of Federal Housing Enterprise Oversight announced that it filed 101 charges against Raines, former chief financial officer Timothy Howard and former controller Leanne Spencer.

Raines and Howard were swept out of office two years ago in the multibilllion-dollar accounting scandal at the government-sponsored company, which finances one of every five home loans in the United States.

The charges reveal how the individuals improperly manipulated earnings to maximize their bonuses, while knowingly neglecting accounting systems and internal controls, misapplying over 20 accounting principles, and misleading the regulator and the public, OFHEO Director James B. Lockhart said in a statement.

OFHEO, the regulator for Fannie Mae and Freddie Mac, its smaller sibling in the $8 trillion home-mortgage market, last May issued a blistering report alleging a six-year accounting fraud at Washington-based Fannie Mae, the second-largest U.S. financial institution after Citigroup Inc.

The regulators said the scheme included manipulations to reach quarterly earnings targets so that company executives could pocket hundreds of millions in bonuses from 1998 to 2004.

Read more in later editions of The Blade and toledoblade.com