FBI looks into Freddie Mac losses - WSJ
NEW YORK, April 29 (Reuters) - Federal investigators looking into possible accounting violations at Freddie Mac (FRE.N) are raising questions about whether the government-backed mortgage company improperly delayed recording billions of dollars of losses, the Wall Street Journal reported on Wednesday, citing people familiar with the matter.
A confidential February 2008 report by the investigative firm Kroll concluded that "inappropriate application" of accounting rules "enabled Freddie to defer billions of dollars of losses incurred from 2001 through 2004" on derivative contracts whose value depends on fluctuations in interest rates, according to people involved in the matter, the Journal said.
Those losses, currently estimated at about $3.7 billion, are due to be gradually recognized in quarterly earnings statements over the next several years, it said.
Investigators from the Federal Bureau of Investigation have obtained a copy of that report, which was never publicly released, and recently sought more information on the issue, these people told the Journal.
The Justice Department and the Securities and Exchange Commission have been investigating a range of accounting practices at Freddie Mac and its larger rival, Fannie Mae (FNM.N), for at least six months. Both firms have disclosed the investigations but haven't provided details on the questions being raised.
A spokeswoman for Freddie Mac told the Journal: "We are confident that our accounting treatment was appropriate and consistent with all applicable accounting guidance."
A spokeswoman for Kroll, a New York-based unit of Marsh & McLennan Cos. (MMC.N), declined to comment to the Journal.
The Federal Housing Finance Agency said it had decided early last year "not to take issue with the accounting" despite the findings of Kroll, which had been hired by it to look into the matter, a spokeswoman for the agency told the Journal.
She cited "disagreement among the experts" and Freddie's defense of its accounting.
The appropriate representative from the FBI could not be reached immediately for comment. A spokesman for Freddie Mac also could not be reached for comment late on Wednesday. (Reporting by Ilaina Jonas; Editing by Muralikumar Anantharaman)
