June 9, 2003
Armando Falcon, Jr., Director of OFHEO, today released a letter to members of the Board of Directors of Freddie Mac outlining initial actions required of the Board related to the Company's restatement process. Director Falcon sent his letter as a result of management misjudgments that led to a misapplication of GAAP principles and disclosures of employee misconduct, specifically, altering and failing to supply documents relevant to the restatement process.
Director Falcon has tasked a special investigative team to assume the review of accounting practices relevant to the restatement process at Freddie Mac and, in addition, management's progress in implementing the action plan that OFHEO has directed the Board to provide. The team will also undertake an investigation of employee misconduct. The team is headed by Stephen Blumenthal, Counsel to the Director, and will employ personnel from various OFHEO offices, including the examination and legal staffs.
Freddie Mac's business fundamentals, asset quality, capital positions and other safety and soundness measures remain strong. OFHEO has had discussions with members of the Board of Directors and the new management team and has their commitment of full cooperation.
A copy of the letter to members [pdf] of the Board of Directors of Freddie Mac is attached.