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Freddie Mac Might Face SEC in Court

MCLEAN, VA-Freddie Mac--in the process of recovering form last year's rough ride that resulted in the government-sponsored enterprise's restating of earnings by $4.4 billion--now finds itself in more trouble as the Securities and Exchange Commission threatens to sue the housing mortgage lender for securities violations.

By Barbra Murray | Updated on August 19, 2004

MCLEAN, VA-Freddie Mac has been put on notice that it may be facing a civil lawsuit by the federal government. The news came to the single-family and rental housing mortgage lender’s attention in the form of a Wells Notice, which informed the company that the Securities and Exchange Commission may decide to slap it with a civil lawsuit for securities violations.

The infringements at issue are related to the government-sponsored enterprise’s financial troubles, exposed last year, which lead to a $4.4-billion restatement of earnings brought on by questionable internal accounting practices. The revelation resulted in the dismissal and resignation of a handful of top players at the company; former chairman and CEO Leland C. Brendsel, and former president and COO David Glenn both had to be replaced.

In December, Freddie Mac signed off on a consent order with the US Office of Federal Housing Enterprise Oversight that compelled it to pay a $125-million fine related to the misstated earnings that covered the years 2000 to 2002. As for its latest legal woe, the ball is now in Freddie Mac’s corner.

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