UPDATE 2-Freddie Mac to pay $50 mln to settle fraud charges

(Adds settlement details, paragraphs 3-7)

By Patrick Rucker

WASHINGTON, Sept 27 (Reuters) - Freddie Mac (FRE.N) has agreed to pay a $50 million penalty to settle charges related to a multibillion accounting fraud at the mortgage finance company from 1998 through 2002, the U.S. Securities and Exchange Commission said on Thursday.

Four former executives at Freddie Mac also settled charges of negligent conduct with the SEC, agreeing to pay civil penalties ranging from $65,000 to $250,000 each, the agency said.

Freddie's former chief financial officer agreed to pay a $125,000 fine to settle his dispute with the SEC and Office of Federal Housing Enterprise Oversight, which oversees Fannie and Freddie.

Vaughn Clarke, who served as CFO from 2000 to 2003, resigned amid an accounting scandal. In the settlement, Clarke agreed to forego any Freddie bonuses that he may be due and will cooperate in any OFHEO case against other former executives.

Clarke's attorney, Steven Salky said his client "is pleased to conclude the matter with the SEC on such favorable terms. As for OFHEO, the settlement vindicates our position and satisfactorily resolves all outstanding matters."

OFHEO now has just one unresolved dispute with former Freddie Mac Chief Executive Leland Brendsel, who headed the company at the time, OFHEO director James Lockhart said.

"It's probably the only loose end from a legal standpoint. We don't intend to go after anyone else," Lockhart said.

The SEC settlement is subject to court approval but is expected to close one of the last unresolved matters stemming from the accounting fraud.

"Today's agreement would resolve the last investigation related to the company's legacy restatement issues," Freddie Mac Chairman and Chief Executive Richard Syron said in a statement Thursday.

The $50 million penalty will show up on Freddie Mac's balance sheet as lowering the company's reserves, but will not affect earnings, a spokesman for the company said.

In January 2003, Freddie announced flaws in its accounting and said it would restate the prior three years of earnings.

Last year, Freddie Mac settled a $410 million shareholder lawsuit and previously resolved fund-raising issues with the Federal Election Commission and a dispute involving an employee retirement program.

Freddie Mac and the former executives settled with the SEC without admitting or denying the charges. (Additional reporting by Karey Wutkowski)