Washington, DC: (Sep-27-07) The US Securities and Exchange Commission (SEC) brought a lawsuit against Freddie Mac, following an investigation related to the restatement of financial results. The SEC charged McLean-based Freddie Mac with securities fraud in connection with improper earnings management beginning as early as 1998 and lasting into 2002. The SEC alleged that Freddie Mac engaged in a fraudulent scheme that deceived investors about its true performance, profitability and growth trends; and that the company misreported its net income in 2000 by 30.5%, in 2001 by 23.9% and 2002 by 42.9%, according to the SEC.
As part of a settlement reached, Freddie Mac agreed to pay a $50 million penalty to resolve allegations. Money from the $50 million penalty is expected to be distributed to injured investors through a fund, the SEC said in a statement. Four former Freddie Mac executives who were charged with negligent conduct agreed to settle the case without admitting or denying the allegations. In 2006, the company agreed to pay $410 million to settle securities class action and shareholder lawsuits. [WASHINGTON BUSINESS JOURNAL: FREDDIE MAC FRAUD]
