Companies
Legal action launched over Fannie Mae financial reporting
The Office of Federal Housing Enterprise
Oversight, the regulator of US mortgage provider,
Fannie Mae, has brought
charges against three of its former executives, including its ex-chairman and
chief executive, Franklin D. Raines.
The charges follow the OFHEO's investigation into the company and include
allegations of inappropriate earnings management and manipulation, deliberately
misleading financial reporting and disclosures and a failure to establish a
sound internal controls process. The OFHEO is seeking the imposition of civil
money penalties and the return of money it said they received, unjustly, under
annual and long-term incentive plans.
Fannie Mae last month issued restatements of its
accounts for 2002 and 2003, and for the first time published financial
statements for 2004. This was welcomed by the OFHEO, which also supported the
legal action launched by the company against its former auditor,
KPMG.
In its lawsuit Fannie Mae alleges at least 30 accounting
policies and practices approved by KPMG were not in line with generally accepted
accounting principles, and argued this led to the accountancy firm “negligently”
approving Fannie Mae’s historical financial statements.
In its complaint Fannie Mae quoted the US
Securities and Exchange Commission’s chief
accountant, who told Congress two of the policies KPMG approved were “outside
professional accounting standards”.
Furthermore, Fannie Mae stated, when specifically asked
whether there was any reason to believe Fannie Mae had accounting problems
similar to those that had come to light at Freddie Mac, its fellow mortgage
lender, KPMG gave the company a clean bill of health.
Links
Office of Federal Housing Enterprise
Oversight
Fannie Mae
KPMG
Securities and Exchange Commission
January, 2007 |
