Former senior executives of Fannie Mae will pay more than $30 million to settle charges that they manipulated financial reports to boost their bonuses.
The three executives have agreed to settle administrative enforcement actions against them by the Office of Federal Housing Enterprise Oversight -- the Washington, D.C.-based company's regulator, according to an announcement today. The actions were taken over allegations of bad accounting and internal control that enabled inflated bonuses.
"The administrative action alleged that the respondents, among other charges, undertook inappropriate earnings management, failed to ensure that adequate internal controls were put in place, released misleading financial reports and permitted the accounting function to operate without adequate resources," OFHEO said in the statement. "The charges concluded that such allegations represented misconduct and unsafe and unsound practices that led to losses suffered by Fannie Mae."
Franklin Raines, former chairman and chief executive officer for Fannie, agreed to settle for a total of $24.7 million. He will donate $1.8 million to assist delinquent borrowers and make a $2.0 million payment to the U.S. Government. In addition, he will relinquish $15.6 million in claims to stock options. Other benefits lost in connection with the settlement were estimated at $5.3 million.
Former Chief Financial Officer Timothy J. Howard's settlement worked out to $6.4 million and was comprised of a $200,000 donations to assist distressed borrowers, a $750,000 payment to the government and the relinquishment of claims to $5.2 million in stock options. Other benefits lost were $240,000.
Leanne G. Spencer, Fannie's former controller, will pay $275,000 to the government and waive any claims for compensation against the government-sponsored housing enterprise.
In addition, all three promise not to work for Fannie again or any company that has a business relationship with Fannie.
"The Consent Orders conclude OFHEO's administrative enforcement proceedings against Mr. Raines, Mr. Howard and Ms. Spencer," the release stated.