Posted on 09/24/2003 8:49:07 AM PDT by AdamSelene235
WASHINGTON, Sept 24 (Reuters) - A U.S. mortgage finance regulator has pushed back to October the release date of its investigation of accounting irregularities at Freddie Mac (NYSE:FRE - News), an official said on Wednesday.
The Office of Federal Housing Enterprise Oversight was due to make public at the end of September the results of its inquiry into an accounting scandal at Freddie Mac, a spokeswoman said. The report will now be out in either early or mid-October, she said.
"It's not a hold-up. It's just in doing a thorough examination, one winds up working on very complex transactions, and we've been looking at various key matters and taking action on them throughout the course of the investigation. And the full public report will be available within the next couple of weeks," OFHEO spokeswoman Corinne Russell said.
OFHEO has in recent weeks successfully pressured Freddie Mac's board to replace its chief executive, Greg Parseghian, who will leave when a new CEO is picked. The regulator has also instructed Freddie Mac to retroactively fire former CEO Leland Brendsel rather than accept his resignation, a change that would cut Brendsel's compensation by millions of dollars.
The regulator is itself under fire from lawmakers, who say it should have acted sooner to deal with problems at Freddie Mac. A congressional panel holds a hearing on Thursday on a proposal to create a new, stronger government overseer of the finances of Freddie Mac and its larger rival, Fannie Mae (NYSE:FNM - News).
Fannie Mae and Freddie Mac are shareholder-owned companies chartered by Congress to expand homeownership. They do not lend directly to home buyers but buy loans from borrowers and repackage mortgages as securities for investors or hold them in their own portfolios.
The two companies owned or had financed 45 percent of the $7.2 trillion U.S. mortgage debt outstanding as of the end of March.
Freddie Mac unsettled markets in June when it replaced its chief executive and two other senior officers over accounting irregularities. A report commissioned by the company's board of directors said executives had ignored accounting rules to underreport earnings over a three-year period by between $1.5 billion and $4.5 billion in an effort to push profits into the future to sustain the image of steady earnings growth.
They've been working on this since January 2003. I find it hard to believe only two more weeks are needed for 'complex transactions'. After recent management shakeups, I think senior officials finally got a look at the finalized restatement and decided more time was needed to coordinate its release with the Fed Reserve and Exchange Stabilization Fund.
If they keep to this schedule, I'll bet it'll be released week of Oct 20th - very light week as far as econ reports go and after any other bad/good news is absorbed from prior weeks.
Only two? You aren't giving those guys enough credit for creativity. The GSE's job is to blow as much money on housing in the shortest period of time possible, and the contradiction is that is exactly what the government wants them to do. The GSE's are the economy right now. I smell a big whitewash coming up.
Richard W.
. A WALL STREET JOURNAL ONLINE NEWS ROUNDUP
MCLEAN, Va. (Dow Jones)--After many delays, Freddie Mac plans to release its reaudited and restated financial results in November, anticipating a total increase in retained earnings of $4.5 billion or more. The mortgage-finance company had originally set a restatement deadline for the end of the month.
Freddie Mac's troubles began Jan. 22 when it announced plans to restate financial results for 2002, 2001 and possibly 2000 due to certain accounting issues involving the hedge accounting treatment of some transactions, including those under FAS 133. Further investigations showed that Freddie Mac hid more than a billion dollars in profit to smooth out earnings movements. In June, the company said lax accounting controls had led it to understate earnings by between $1.5 billion and $4.5 billion, after taxes, which translates into as much as $6.9 billion before taxes. At the time, Freddie said it couldn't provide a more specific number until its reaudit is completed.
In a news release Thursday, Freddie Mac said it is extending its Sept. 30 restatement deadline because of computer-system changes, more data processing and the timing of validation of the results. The company stressed the delay isn't a result of further accounting problems, noting that almost all of its new accounting policies have been finalized.
Martin Baumann, Freddie Mac's executive vice president for finance and chief financial officer, said Thursday the delay in the earnings restatement wasn't caused by newly discovered accounting errors.
Rather, he said, the company found in its review that computer-system changes were needed, as well as more data processing.
"We regret the need to extend our restatement deadline of Sept. 30, but our Number One priority has been - and continues to be - getting our financial statements right," Baumann said in a statement. "We cannot sacrifice the integrity of the process."
Freddie Mac reiterated that all of its accounting corrections the restatement should address fall into one of the five categories disclosed June 25: security classification, accounting for derivative instruments, asset transfers and securitizations, valuation of financial instruments, and all other corrections. The computer-system modifications the company must engage in affect the asset transfers and securitizations category.
Freddie Mac also anticipates an increase of about $4 billion in the fair value of shareholders' equity as of the end of 2002 from the end of 2001. However, the company stressed that neither this measure nor the restatement and reaudit processes are complete, so the final figures could change.
Freddie Mac's problems erupted in June when the company fired President and Chief Operating Officer David Glenn because of "serious questions about the timeliness and completeness of his cooperation and candor with the board's audit committee counsel." The company also fired two other top executives.
Freddie Mac named its former chief investment officer, Gregory J. Parseghian, to be president and chief executive, but ousted him just two months later once an internal investigation revealed Parseghian knew far more about the company's accounting irregularities than once suspected.
Freddie Mac now faces investigations by the Securities and Exchange Commission, the Justice Department, the federal multi-agency Corporate Fraud Task Force and the Office of Federal Housing Enterprise Oversight.
In New York Stock Exchange composite trading on Thursday morning, Freddie Mac was down 45 cents to $52.83 a share.
For continuously updated news from The Wall Street Journal, see WSJ.com at http://wsj.com.
(END) Dow Jones Newswires
09-25-03 1210ET- - 12 10 PM EDT 09-25-03
DJ FMR/Stakes -3:Lowers Freddie Mac Stake To 2.864% Vs 4.25%
.
FMR Corp. reduced its stake in Federal Home Loan Mortgage Corp.
(FRE), or Freddie Mac, to 2.864% from 4.25%, according to an amended Schedule
13G released by the Securities and Exchange Commission Friday.
The investor reported owning 19.7 million Freddie Mac shares, down
from 29.5 million as of June 30.
FMR reduced its stake in Activision Inc. (ATVI), a developer,
publisher and distributor of interactive entertainment software, to 4.49%
from 9.72%, according to a separate filing.
The investor reported owning 3.96 million Activision shares, down
from 8.56 million as of June 30.
FMR raised its stake in computer maker Gateway Inc. (GTW) to 10.761%
from 6.71%, according to a separate filing.
It reported owning 34.9 million Gateway shares, up from 21.7 million
as of June 30.
(MORE) Dow Jones Newswires
10-10-03 0957ET- - 09 57 AM EDT 10-10-03
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