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Last Updated: Wednesday, 10 December, 2003, 16:45 GMT
Freddie Mac to pay $125m penalty
New York apartments
Freddie Mac is one of America's largest mortgage lenders
Mortgage finance company Freddie Mac is to pay a $125m penalty to settle allegations of cooking the books.

US regulators had accused the firm of ignoring accounting rules and of making transactions for the sole purpose of masking its earnings volatility.

The company's board was also criticised for complacency and not supervising its managers properly, by the Office of Federal Housing Enterprise Oversight.

The agency described the firm's whole accountancy practice as weak.

Separation

In addition to the $125m (72m) penalty, Freddie Mac has agreed to separate the functions of chairman and chief executive, consider setting time limits for board members, and submit a plan to improve corporate governance.

Freddie Mac chairman Shaun O'Malley said the settlement was a step towards restoring investor confidence in the company.

But he added that the firm "strongly disagrees" with parts of the agency's investigation into its accounting problems.

Mr O'Malley said: "The board and management are working tirelessly to implement our remediation program to ensure that nothing like this ever happens again."

Under-reported

Last month Freddie Mac said it had under-reported earnings by $4.4bn (2.5bn) between 2000 and 2002.

Back in June it replaced its chief executive Leland Brendsel, and then in August agreed to remove his replacement Gregory Parseghian, because of their roles in the accountancy problems.




SEE ALSO:
Freddie Mac seeks new chief
25 Aug 03  |  Business
Freddie Mac failings exposed
23 Jul 03  |  Business
US housing giant restates profits
25 Jun 03  |  Business


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