[an error occurred while processing this directive]
BBC News
watch One-Minute World News
Last Updated: Wednesday, 23 July, 2003, 15:56 GMT 16:56 UK
Freddie Mac failings exposed
New York apartments
Freddie Mac and Fannie Mae are crucial to the US mortgage market
US home loans giant Freddie Mac was guilty of sloppy accounting and failures of governance, an independent lawyers' report has demonstrated.

The 107-page outside report, prepared by law firm Baker Botts after a seven-month investigation, was part of the company's response to an accounting scandal that is currently being probed by regulators and the US Congress.

Freddie Mac, one of two large quasi-state companies that underwrite most US mortgages, restated its earnings in June by $1.5bn, after admitting that it had massaged its results for years.

Baker Botts said it had found "issues of (i) accounting policy and financial reporting, (ii) internal control adequacy, (iii) former management's governance practices, and (iv) disclosure policy."

Staying sound

"This is a painful day for Freddie Mac," said Shaun O'Malley, the firm's new chairman.

Mortgage lender shares
But he insisted that the financial soundness of the company had never been in doubt.

Freddie Mac has hired PricewaterhouseCoopers to audit its books, having previously relief on the advice of Arthur Andersen, the firm discredited in the collapse of Enron.

But a number of investigations are still proceeding into Freddie Mac, and even into Fannie Mae, its slightly larger rival, so far untainted by accounting allegations.

A number of Congressional hearings are in process, and the Office of Federal Housing Enterprise Oversight (OFHEO), the main regulator, is hiring forensic accountants to investigate the affair.




SEE ALSO:
US widens mortgage probe
14 Jul 03  |  Business
US housing giant restates profits
25 Jun 03  |  Business
New probe into US housing giant
12 Jun 03  |  Business
Greenspan warns of housing slowdown
04 Mar 03  |  Business
Heads roll at US mortgage giant
09 Jun 03  |  Business


RELATED INTERNET LINKS:
The BBC is not responsible for the content of external internet sites


PRODUCTS AND SERVICES

News Front Page | Africa | Americas | Asia-Pacific | Europe | Middle East | South Asia
UK | Business | Entertainment | Science/Nature | Technology | Health
Have Your Say | In Pictures | Week at a Glance | Country Profiles | In Depth | Programmes
Americas Africa Europe Middle East South Asia Asia Pacific