Hearing set on charges vs ex-CEO at Freddie Mac
By Patrick Rucker
WASHINGTON, Oct 11 (Reuters) - The former chairman and chief executive of Freddie Mac (FRE.N) will face charges at a hearing on Monday that he wrongly smoothed earnings at the mortgage finance company to please investors.
Freddie Mac's regulator, which is bringing the case, alleges that Leland Brendsel, who was forced to resign in June 2003, was a key figure in an accounting scandal that rocked the Virginia-based company.
"Mr. Brendsel oversaw and directed various unsafe and unsound manipulations and transactions to achieve his ends, inappropriately shifting earnings to hit earnings targets and achieve steady mid-teens growth," the Office of Federal Housing Enterprise Oversight said in the complaint.
Brendsel, who spent nearly 20 years at Freddie Mac, is due to appear on Monday before an administrative law judge who hears complaints brought by federal agencies like OFHEO.
In January 2003, Freddie announced flaws in its accounting and said it would restate the prior three years of earnings. In the years since, the company has resolved many outstanding regulatory and investor issues stemming from that improper accounting.
Last month the company agreed to pay a $50 million penalty to settle charges from the Securities and Exchange Commission and last year it settled a $410 million shareholder lawsuit.
In a 159-page complaint filed this week, OFHEO asks that Brendsel be forced to pay a penalty of $100,000 for each day prior to Jan. 4, 2001, and $110,000 for each day after, that he is found to have contributed to improper actions at Freddie Mac.
Between 2001 and 2003, Brendsel earned roughly $17 million in compensation, according to a securities filing from Freddie Mac.
Brendsel's attorney, Kevin Downey, was not immediately available for comment but the former Freddie Mac executive has been in a years-long battle with OFHEO over his compensation and is expected to continue that fight.
