Fannie Mae came under fire for “accounting irregularities” as it put up false earning statements to enrich its executives by millions of dollars. Fannie Mae is a quasi governmentally run company, privately run but with a great deal of governmental support in the marketplace.
The company has agreed to pay 400 million dollars in fines to the government, but the most important thing it needs to do is prosecute the politically connected executives that committed this fraud. Otherwise the cycle of fraud and deceipt will continue again and again. If the executives feel like they can get away with the fraud and only the nebulous company pays, what is to stop another generation to commit the same fraud?
The settlement and the report are a good start — but only that — to bringing Fannie Mae in line. The company, which has not filed an earnings statement since 2004, must get its finances in order. It already has invested millions to speed the process along, but it may still need months, if not years, to resolve its accounting discrepancies, estimated at $11 billion. Normal operations (not to mention recovery of the company’s stock, down more than 30% since 2004) depend on clearing this formidable hurdle.
Fannie Mae’s board should consider the next best thing to retroactively firing former Chief Executive Franklin Raines and former Chief Financial Officer Timothy Howard, who were allowed to take early retirement in 2004. It should force Raines and Howard — and any others who profited through the accounting tricks — to reimburse the company for the compensation they received by falsely achieving earnings targets. According to the report, $52 million of Raines’ $90 million in compensation from 1998 to 2003 was linked to “achieving” earnings-per-share goals.
Fork it over, Fannie Mae – Los Angeles Times.
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