Former Fannie Execs Charged, Face 101 Counts of Misconduct

The Office of Federal Housing Enterprise Oversight (OFHEO) announced that it has filed charges containing 101 counts of misconduct against three former Fannie Mae executives, former Chairman and CEO Franklin D. Raines, former Vice Chairman and Chief Financial Officer J. Timothy Howard, and former Senior Vice President and Controller Leanne G. Spencer. According to a statement issued by OFHEO, remedies sought will include civil money penalties that could exceed $100 million, disgorgement of bonuses totaling over $115 million, loss of indemnification, and debarment from participating in Enterprise affairs. “The Notice of Charges details the harm to Fannie Mae resulting from the conduct of these individuals from 1998 to 2004,” said OFHEO Director James Lockhart. “The 101 charges reveal how the individuals improperly manipulated earnings to maximize their bonuses, while knowingly neglecting accounting systems and internal controls, misapplying over twenty accounting principles and misleading the regulator and the public. “The Notice explains how they submitted six years of misleading and inaccurate accounting statements and inaccurate capital reports that enabled them to grow Fannie Mae in an unsafe and unsound manner. The misconduct cost the Enterprise and shareholders many billions of dollars and damaged the public trust,” Lockhart said. The Notice of Charges alleges that Mr. Raines, Mr. Howard and Ms. Spencer knowingly and/or recklessly engaged in misconduct and safety and soundness violations that caused substantial and/or material harm and loss to the Enterprise. Such harm was the result of a pattern of misconduct, encompassing both the individual and collective action of these individuals. They operated Fannie Mae in an unsafe and unsound manner, facilitating excessive growth and unjustified bonuses. The Notice of Charges makes 101 claims for relief for specific violations of law and regulation for conduct and misconduct recounted in the Notice. Of the charges filed, 79 include Mr. Raines, 89 include Mr. Howard and 73 include Ms. Spencer. Attached: Link to full Notice of Charges.

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