Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: maceng2 who wrote (11726)	7/23/2003 3:35:15 PM
From: maceng2	Respond to of 306849

Freddie Mac probe findings are unveiled Wednesday July 23, 2:55 pm ET [Financial Times article] By Jennifer Wiggins in New York and Peronet Despeignes in Washington biz.yahoo.com An independent report on the accounting scandal at Freddie Mac found that former executives deliberately managed earnings and misled the board, but it absolved its new chief executive of wrongdoing. The government-sponsored mortgage group on Wednesday published the report by Baker Botts, the law firm hired last year to probe alleged earnings misstatements. The investigation, carried out with the co-operation of Freddie Mac, found that to achieve steady earnings growth, senior management had encouraged the use of complex financial transactions that did not comply with accounting rules. Gregory Parseghian, the former chief investment officer appointed chief executive last month, was involved in some of the transactions. However, James Doty, the former SEC general counsel who led the probe, said Mr Parseghian was unaware the transactions did not comply with accepted accounting principles. "[His] involvement was not wrongful involvement," Mr Doty said. Shaun O'Malley, chairman of Freddie Mac's board, said directors had no questions about Mr Parseghian's integrity: "We stand fully behind him and believe he is absolutely the right person for the job." Freddie Mac last month parted company with three top executives, including Leland Brendsel, chief executive. Wednesday's report revealed that senior managers had tried to hide information about certain financial transactions from the board. "Senior management's approach to governance was such that the information flow to the board was tightly scripted and controlled," it said. The board is re-assessing Freddie Mac's internal accounting practices and corporate culture and will undertake "a remediation process" over the next year. A handful of employees - fewer than 10, according to Mr O'Malley - have been fired from Freddie Mac's accounting division since last month, and further dismissals could follow. Freddie Mac said on Wednesday it still expected to increase its retained earnings to $4.5bn when it restates at the end of the third quarter. Mr Doty side-stepped the question of whether Freddie Mac should fall under SEC disclosure rules, despite comments earlier this week from Martin Baumann, the company's chief financial officer, that many of the accounting problems might have been avoided if it had.