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OFHEO enters $16.4 million settlement with ex-Freddie exec.

The former head of Freddie Mac and the government have reached a $16.4 million agreement to settle outstanding charges of accounting violations in the GSE's multibillion-dollar accounting scandal, announced the Office of Federal Housing Enterprise Oversight (OFHEO).

Under the consent order with OFHEO, former Freddie Mac Chairman and Chief Executive Officer Leland Brendsel agreed in November to pay $2.5 million in fines to the government, give back $10.5 million in previously paid salary and bonuses, and waive claims against Freddie for any additional compensation valued at $3.4 million.

Brendsel, under terms of the settlement with the government, admits no wrongdoing.

OFHEO first filed charges against Brendsel in December 2003, alleging that, among other things, Brendsel "established a corporate culture that allowed improper earnings management to develop, failed to ensure that adequate internal controls were put in place and permitted the accounting function to operate without adequate resources."

Furthermore, OFHEO alleged that Brendsel's actions resulted in "misconduct and unsafe and unsound practices" that led to the losses suffered by Freddie Mac--namely, the accounting mistakes that required the company to restate close to $5 billion in earnings from 2000 to 2002.

The settlement also mandates no future employment of Brendsel by Freddie Mac without the government's permission, according to OFHEO Director James B. Lockhart.

"OFHEO's responsibility to address the safe and sound operations of the enterprises includes assuring that corporate leadership focuses on all aspects of corporate operations, particularly those that set a tone for an entire company," said Lockhart. "While the consent order today represents a satisfactory conclusion to the enforcement actions arising from matters addressed in OFHEO's special examination of Freddie Mac, we continue to monitor the enterprise's ongoing remediation."

Lockhart said that Brendsel's refunded salary and bonus will be used to assist homeowners at risk of foreclosure.

OFHEO had previously entered into a consent order with Freddie Mac that entailed a restructuring of the company, major remediation of controls, extensive changes in accounting policies and corporate governance, building of a new information technology infrastructure and a $125 million civil money penalty.

Prior to Brendsel, OFHEO said it previously entered into consent orders with former President and Chief Operating Officer David Glenn and with former Chief Financial Officer Vaughn Clarke, both of which included a civil money penalty of $125,000.
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Title Annotation:Briefing Book; Office of Federal Housing Enterprise Oversights contract with Leland Brendsel
Comment:OFHEO enters $16.4 million settlement with ex-Freddie exec.(Briefing Book)(Office of Federal Housing Enterprise Oversights contract with Leland Brendsel )
Publication:Mortgage Banking
Date:Dec 1, 2007
Previous Article:Delinquency, foreclosure risk to extend into 2009.
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