[Update 1: Updated with a statement from Richard Syron]
The Securities and Exchange Commission’s high-profile case against several former Freddie Mac executives over allegedly misleading investors about the quality of subprime mortgages is now over, and it ended rather quietly.
According to multiple reports, including the Wall St. Journal, the SEC reached a settlement agreement with former Freddie Mac CEO Richard Syron and former senior executives Patricia Cook and Donald Bisenius, with the parties agreeing to penalties far less harsh than the SEC originally sought.
“I am deeply relieved and gratified by today’s announcement that the longstanding litigation with the SEC has been resolved. The Agreement states that it is not in the interests of justice to continue to litigate this matter, and I wholeheartedly agree with that sentiment,” Syron said in a statement provided to HousingWire by Sidley Austin LLP, which served as Syron’s counsel.
“It has been a long, tough road and I am happy for the opportunity to move on with my life. Through it all, I have been supported by my friends and family, particularly my wife, Peggy. I am forever grateful to them,” Syron continued.
“I have always been proud of my years of government service and my work in the private sector. And, I remain proud of the work we did at Freddie Mac. Patti Cook and Don Bisenius are among the finest people with whom I have worked and I am happy that the case is behind us, for their sake as well.
“As the Agreement states, the ‘parties have vigorously litigated this case’ and that is certainly true. I am very grateful to my counsel at Sidley Austin LLP, who worked so aggressively, tirelessly and effectively to represent me over these many years. They have my gratitude and my thanks for a job well done.”
In the initial complaint, the SEC alleged that Syron, Cook and Bisenius violated anti-fraud provisions of U.S. securities laws by failing to accurately represent Freddie Mac’s subprime mortgage portfolio and the GSE’s overall exposure to riskier mortgages denoted as ‘subprime’ to investors, according to court records.
The Wall St. Journal report details the nature of the sanctions against the former Freddie executives. From the WSJ report:
The SEC had sought financial penalties against the executives and an order barring them from serving as officers and directors at other companies.
Instead, the executives agreed for a limited time not to sign certain reports required by chief executives or finance chiefs and to pay a total of $310,000 to a fund meant to compensate defrauded investors. Those amounts will be paid by insurance paid by Freddie Mac that covered the executives.
The case against Syron, Cook and Bisenius played out in court over the last several years, but the case is over now.
Again, from the WSJ:
The agreement said both sides disputed the degree to which Freddie Mac’s subprime disclosures were susceptible to misinterpretation on the question of how Freddie Mac quantified its exposure to subprime loans. It also says both sides agreed to the settlement “without conceding the strengths and weaknesses of their respective claims and defenses.”
The Tuesday agreement acknowledges “there was no one universally accepted definition of subprime that was used by market participants” in 2007 and 2008, the time period at issue in the lawsuit."