UPDATE 8-Freddie Mac CFO in apparent suicide - police source

* Freddie Mac CFO found hanging in basement -police source

* Freddie Mac: No indication death linked to federal probe

* Kellermann 16-year Freddie veteran, key in accounting

* Neighbors and co-workers shocked, saw no signs of stress

* Kellermann got $850,000 retention bonus in Sept (Adds details)

By Deborah Charles

RESTON, Va., April 22 (Reuters) - The finance chief of troubled U.S. mortgage giant Freddie Mac FRE.PFRE.N, David Kellermann, was found dead on Wednesday after apparently committing suicide, a police source said.

Kellermann, promoted to acting chief financial officer last September after the government took control of the company, was found hanging in the basement of his home in an affluent Washington suburb at around 5 a.m. (0900 GMT).

There was no immediate indication what would have driven 41-year-old Kellermann, who was married and had a young daughter, to kill himself.

Kellermann, a 16-year veteran of Freddie Mac, had played a key role in helping it to navigate past accounting scandals and answer questions from regulators and investors who put the company under intense scrutiny as a five-year U.S. housing market boom ended in 2006.

Last year's government takeover of Freddie Mac and its sibling mortgage agency Fannie Mae FNM.N came as the companies, known as government enterprises, faced deep losses and the effects of the housing crash engulfed other financial institutions.

Freddie Mac is currently being investigated by the Securities and Exchange Commission. It has provided documents and made employees available for interview in the case but neither the company nor the SEC have given details.

“Freddie Mac knows of no connections between this terrible personal tragedy and the ongoing regulatory inquiries discussed in our SEC filings,” said Freddie Mac spokesman David Palombi.

The current probe is far less intense than the grilling several years ago after accounting and political fundraising scandals, several Freddie Mac employees said.

“Back then, investigators took everything. You’d be lucky if they left your kids’ pictures,” said one long-time employee.


There have been several high-profile suicides of business executives around the world in the last six months as the financial crisis took hold.

While former colleagues said Kellermann and the accounting team had been under intense stress, he had an outgoing personality.

“He was not like some introverted recluse of some sort,” said Byron Boston, chief investment officer at mortgage REIT Dynex Capital, who was vice president and co-manager of Freddie Mac’s mortgage portfolio group from 1997 to 2003. “If you sat and worked with him every day, he was a fun guy.”

Fairfax County police officials would not confirm the death as a suicide but said officers were called to Kellermann’s home in Reston before dawn and found him dead in the basement.

“We do not suspect foul play,” said Fairfax County police spokesman Eddy Azcarate.

The county medical examiner would have no decision on Wednesday about the manner and cause of death, police said.

In September, Kellermann was awarded a retention bonus of $850,000 to be paid out over 18 months, Freddie Mac said.

Kellermann hired a private security firm after reporters came to his house to ask about his bonus several weeks ago when there was a public outcry over compensation at companies that have received government aid, the New York Times said.

Freddie Mac and Fannie Mae had a hand in about half of the entire U.S. mortgage market and were taken over in an effort to ward off further damage to the housing market.

“From my understanding, he was working very, very hard,” Boston said of Kellermann. “Accounting issues, the company gets taken over by the government, it’s just a complete mess. I could just imagine what kind of pressure that would put on you.”

While Freddie Mac has seen its executive ranks churn since accounting improprieties first emerged in 2003 and it has booked multibillion-dollar losses in recent quarters, those who knew Kellermann spoke of his good character.

“For many years, we have known David as a person of the utmost ethical standards who was hard-working and knowledgeable in his field,” the Federal Housing Finance Board, Freddie Mac’s chief regulator, said in a statement.

Before taking over as acting CFO, Kellermann had been senior vice president, corporate controller and principal accounting officer.


He was known as a cheerful personality around the office with a light-hearted manner. Former colleagues said he sometimes wore a bow tie.

He volunteered in the community with a charity for the homeless. He and his wife had a daughter who neighbors said is aged about 5 or 6.

“They were the last people in the world you’d think this would happen to,” said Susan Unger, who lives across the street from the Kellermanns in the Hunter Mills Estates of million-dollar homes.

Unger and her husband said the Kellermanns were known on the street for having the fanciest Christmas decorations. They even decorated their brick house for Halloween and with hearts for Valentine’s Day.

Freddie Mac’s interim chief executive, John Koskinen, visited the Kellermann home on Wednesday morning and later addressed employees, encouraging them to take time off if they needed to grieve. Freddie Mac delayed for at least one day the routine sale of new notes. [nN221991]

The executive’s death was the latest of several recent blows to Freddie Mac, including David Moffett’s resignation as chief executive in March after just seven months on the job.

Kellermann’s death followed several high-profile suicides in the global financial crisis.

German billionaire businessman Adolf Merckle threw himself in front of a train in January after heavy losses on the stock market.

Frenchman Thierry Magon de la Villehuchet, co-founder of money manager Access International, slit his wrists with boxcutters and was found dead in a New York office building in December, reportedly distraught over losing up to $1.4 billion in client money to Bernard Madoff’s fraud. (Additional reporting by Walden Siew and Al Yoon in New York, Patrick Rucker and Randall Mikkelsen in Washington; Editing by John O’Callaghan)