Freddie Settles SEC Case

Among the violations, the SEC alleges that Freddie Mac attempted to "nullify" the transitional effects of accounting changes related to derivative instruments and hedging activities. It also recorded an improper change in valuing the company's "swaptions" portfolio at year-end 2000, while also improperly using derivatives to shift earnings between periods. Freddie Mac also improperly used a certain reserve in connection with the accounting of loan origination costs. It also reported reserves for losses on loans that were "materially in excess of probable losses," the SEC said.

Freddie Mac agreed to pay the penalty, which will be distributed to investors through a Fair Fund, without admitting or denying the allegations.

"We take these charges seriously, and that's why the Freddie Mac of today is a very different company than the Freddie Mac of the past," Richard F. Syron, Freddie Mac's chairman and chief executive, said in a separate statement. "Today's agreement would resolve the last investigation related to the company's legacy restatement issues. This is another milestone enabling us to focus entirely on those things that are most important -- further advancing our housing mission, effectively serving our customers and building our business for the future."

The SEC also charged Freddie Mac's former president and vice chairman David Glenn, its former CFO Vaughn Clarke and two other former executives. As part of the settlement, the four executives agreed to pay penalties ranging from $65,000 to $125,000 and reimbursement to investors between $29,000 to $62,000, without admitting or denying the allegations.

Shares of the company rose 25 cents to $59.80.

>To order reprints of this article, click here: Reprints