Executives misreported mortgage giants' risky loan exposures, the SEC alleges
The United States. Securities & Exchange Commission filed lawsuits on Friday against six previous top Fannie Mae & Freddie Mac executives, including their previous chief executives, over securities fraud, charging they deceived investors about the scope of the exposure the mortgage giants' had to subprime loans with higher risks.
In two individual lawsuits by the SEC, charges were filed against three previous Fannie Mae executives: Daniel H. Mudd;, previous CEO Enrico Dallavecchia previous chief risk officer; and Thomas A. Lund; previous executive VP of the Fannie Mae single-family home mortgage business and three previous Freddie Mac executives: Richard F. Syron previous CEO and chairman of the board; Patricia L. Cook previous chief business officer and executive vice president; Donald J. Bisenius previous executive VP of their single-family home guarantee business.
Fannie Mae, officially known as Federal National Mortgage Association, plus Freddie Mac, known as the Federal Home Loan Mortgage Corporation., both of which entered into non-prosecution arrangements with the SEC, with each making an agreement to accept all responsibility for their behavior without admission or denial of liability. Both of the enterprises sponsored by government also agreed to fully cooperate with the actions of the SEC against the previous executives.
"Fannie and Freddie executives advised the entire world that their exposure to various subprime loans was considerably less than it actually was," director of the SEC enforcement division, Robert Khuzami, said in a statement.
"These material misstatements took place during a period of heightened investor interest in the exposure of the financial institutions' to subprime loans, plus deceived the market over the degree of risk contained on the books of the company's."
The lawsuits, which were filed within a federal district court, within New York City charge that these six previous executives "triggered the federal mortgage giants to materially misrepresent their subprime mortgage loans holdings during periodic and other SEC filings, media interviews, public statements, and investor calls.."
The lawsuit against the previous Fannie executives also charge they additionally misreported their Alt-A loan exposure. The previous Fannie Mae executives purportedly committed these activities during December 2006 to August 2008, and the former executives of Freddie Mac purportedly committed them from March 2007 to August 2008.
The suits is seeking surrender of all ill-gotten gains plus interest, financial penalties, permanent injunctive relief, plus to forever bar the six previous executives from holding any director or officer positions in particular companies.
Dec 27, 2011