updated 12/18/2006 4:28:43 PM ET 2006-12-18T21:28:43

The government on Monday filed civil charges against former Fannie Mae chief Franklin Raines and two other executives, seeking fines and the return of millions in bonus money.

The Office of Federal Housing Enterprise Oversight announced that it filed 101 charges against Raines, former chief financial officer Timothy Howard and former controller Leanne Spencer.

Raines and Howard were swept out of office two years ago in the multibillion-dollar accounting scandal at the government-sponsored mortgage giant, which finances one of every five home loans in the United States.

Attorneys for Raines and Howard disputed the regulators’ charges and said they were politically motivated. The lawyer for Raines called OFHEO Director James B. Lockhart “a fatally biased regulator” and asked him in a letter to remove himself “immediately and completely from any further regulatory action affecting Mr. Raines.”

Lockhart’s true motivation in the charges is to get Congress to enact legislation tightening the government reins on Fannie Mae and Freddie Mac, its smaller sibling in the $8 trillion home-mortgage market, said Raines’s attorney, Kevin Downey.

Lockhart said the charges “reveal how the individuals improperly manipulated earnings to maximize their bonuses, while knowingly neglecting accounting systems and internal controls, misapplying over 20 accounting principles, and misleading the regulator and the public.”

OFHEO, the regulator for Fannie Mae and Freddie Mac, last May issued a blistering report alleging a six-year accounting fraud at Washington-based Fannie Mae, the second-largest U.S. financial institution after Citigroup Inc.

The regulators said the scheme included manipulations to reach quarterly earnings targets so that company executives could pocket hundreds of millions in bonuses from 1998 to 2004.

OFHEO said Monday it is seeking civil fines of $100 million or more against the three former executives and restitution totaling more than $115 million in bonus money.

The notice of charges filed by the agency alleges that Raines, Howard and Spencer “knowingly and-or recklessly engaged in misconduct and safety-and-soundness violations that caused substantial ... harm and loss” to Fannie Mae.

The allegations will be heard by an administrative law judge, who will make a recommendation to Lockhart — not a binding decision — on whether the charges should stand. The three would have the right to appeal a final ruling in federal court.

Howard’s attorney, Steven Salky, called the allegations against his client “a politically motivated attempt to rewrite history.”

The charges are “a work of unsubstantiated fiction, starkly at odds with both the actual facts and the conclusions reached by OFHEO during its extensive annual examinations of Fannie Mae,” Salky said. “We are eager for a fair and impartial adjudication of these claims, which will demonstrate the propriety in all respects of Mr. Howard’s conduct.”

Spencer’s lawyer, David Krakoff, didn’t immediately return a telephone call seeking comment.

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