Judge Orders That $60 Million Can't Be Withheld From Former Freddie Mac CEO
September 1, 2004
WASHINGTON (AP) -- A federal judge has ordered that $60 million in compensation cannot be withheld from an ousted chief executive of Freddie Mac, in a setback to federal regulators seeking to strip him of the money for his alleged role in the company's accounting scandal.
U.S. District Judge Richard Leon ruled Monday that the federal agency that oversees Freddie Mac exceeded its authority when it ordered the mortgage giant in December to withhold severance benefits and stock awards that Leland Brendsel received after being forced out by the company's board in June 2003.
The Office of Federal Housing Enterprise Oversight also has been seeking to remove $750,000 in severance benefits from former chief financial officer Vaughn Clarke, who left the government-sponsored company along with Brendsel and former president David Glenn. In addition, the agency has asked for restitution of $3.8 million from Brendsel and $537,000 from Clarke as well as civil fines of $5.8 million and $2.6 million from Brendsel and Clarke, respectively.
Corinne Russell, a spokeswoman for OFHEO, said Tuesday that the agency was reviewing the judge's ruling with the Justice Department. It wasn't immediately clear whether the agency could appeal the ruling.
Russell also said the agency would continue to pursue its proceeding against Brendsel for restitution and a fine.
Glenn agreed in October to pay a $125,000 civil fine to settle the agency's case against him, neither admitting to nor denying the allegations.
Freddie Mac itself was fined a record $125 million in a settlement with the agency, which supervises Freddie Mac and its larger rival Fannie Mae in the multitrillion-dollar home mortgage market. The regulators accused McLean, Va.-based 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.
Freddie Mac's settlement, in which it neither admitted to nor denied wrongdoing, still left to be resolved a criminal investigation by the Justice Department and a civil inquiry by the Securities and Exchange Commission.
Although Brendsel and Clarke previously signed employment contracts with Freddie Mac granting them the benefits, the company has promised to comply with an eventual formal order by the agency after an administrative process.
Freddie Mac spokeswoman Sharon McHale said the company needed to review Leon's ruling and had no immediate comment.
Brendsel's attorneys handling the compensation case didn't immediately return telephone calls seeking comment.
A year ago, OFHEO ordered the ouster of Brendsel's replacement, Gregory Parseghian -- who had played a role in some of the company's questionable financial transactions, according to a report by attorneys hired by the board. Freddie Mac in December named Richard Syron, a Wall Street veteran and former Federal Reserve official, as its new chairman and chief executive.
Copyright: Associated Press