Freddie Mac agrees $50m penalty

Freddie Mac provides the finance for most home loans in the US

US mortgage lender Freddie Mac has agreed to pay a $50m (£24.6m) penalty to settle charges that it massaged its earnings between 1998 to 2002.

US regulators accused the firm of presenting a misleading picture of its earnings growth during that period.

Four former Freddie Mac executives were also fined for negligent conduct in relation to the accounting scandal.

The firm that finances most US home loans and its former management did not admit to or deny the charges.

The settlement, dependant on court approval, is hoped to draw a line under the Securities and Exchange Commission's (SEC) probe into Freddie Mac's accounting fraud that began in 2003.

In December of that year, the government-backed company agreed to pay $125m in fines to the housing market regulator the Office of Federal Housing Enterprise Oversight.

'Steady Freddie?'

The scandal erupted at the government-backed company after it emerged that it had been breaching accounting rules to smooth out volatility in its earnings statements and so meet analysts' expectations.

Freddie Mac was forced to restate its earnings and its top executives, including former president and chief operating officer David Glenn and ex financial officer Vaughn Clarke, were sacked.

On Thursday, they and two ex senior vice presidents agreed to pay $515,000 in civil fines and to make restitution totalling $275,548.

In a filing in a federal court in Washington, the SEC said: "As has been seen in so many cases, Freddie Mac's departure from proper accounting practices was the result of a corporate culture that sought stable earnings growth at any cost."

The SEC added that the company's $50m penalty would be distributed to shareholders who had suffered from the alleged accounting fraud.

Richard F Syron, Freddie Mac's chairman and chief executive officer said: "Today's agreement would resolve the last investigation related to the company's legacy restatement issues."

Freddie Mac, along with fellow lender Fannie Mae, was created by Congress in the 1960s to buy blocks of home loans from banks and then re-package them into bonds for sale on Wall Street.