Freddie Mac, the mortgage finance company known mostly for its government-subsidized loan programs for low-income buyers, will pay $50 million in a settlement with the Securities and Exchange Commission (SEC) following an investigation into improper earnings management.
The SEC argued Freddie Mac, officially known as the Federal Home Loan Mortgage Corp., fraudulently misstated earnings over a four-year period.
The accounting scandal came to light in June 2003, when Freddie Mac said it misstated earnings by $5 billion between 2000 and 2002.
The $50 million penalty likely will be distributed to investors hurt by the misstatements, according to news reports.
Under the terms of the settlement, which still is subject to final court approval, Freddie Mac “neither admits nor denies allegations of federal securities law violations,” the lender said in a statement.
"We take these charges seriously, and that's why the Freddie Mac of today is a very different company than the Freddie Mac of the past," said Richard Syron, Freddie Mac's chairman and CEO. "[The] agreement would resolve the last investigation related to the company's legacy restatement issues.”
The scandal led to the ousting of several of the company’s top executives, including then-CEO Leland Brendsel. Four of the company’s former executives have settled with the SEC while admitting no wrongdoing, including president and COO David Glenn, former CFO Vaughn Clarke and former senior vps Robert Dean and Nazir Dossani.