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Penalties sought in Freddie Mac case

Federal regulators will file administrative charges as soon as today seeking civil penalties from two former top executives at Freddie Mac over their roles in the mortgage giant's $5 billion accounting scandal.
/ Source: The Associated Press

Federal regulators on Thursday filed administrative charges seeking a total $8.4 million in fines and the recovery of millions more in severance benefits from two ousted top executives of Freddie Mac for their role in the mortgage giant’s $5 billion accounting scandal.

The regulators also want to strip former chief executive Leland Brendsel of $24.4 million in severance benefits and stock awards that he received after being forced out by the company’s board in early June.

The Office of Federal Housing Enterprise Oversight also is seeking to remove $750,000 in departure benefits from ex-chief financial officer Vaughn Clarke.

The penalties OFHEO is seeking — including civil fines of $5.8 million and $2.6 million from Brendsel and Clarke, respectively — must be approved by a federal judge.

The move comes about a week after Freddie Mac agreed to pay a record $125 million civil fine in a settlement with the agency, which supervises Freddie Mac and its larger rival Fannie Mae in the multitrillion-dollar home mortgage market. In a report issued at that time, the regulators accused government-sponsored Freddie Mac, the second-largest U.S. buyer of home mortgages, of violating its public trust. They blamed misconduct by management — including Brendsel and Clarke — for the $5 billion misstatement of earnings for 2000-2002.