Report: Regulators Probe Pay to Fannie's Raines

Some of the wealth enjoyed by

Fannie Mae's

(FNM)

top executives could be threatened now that they have left the company under strained circumstances.

The Office of Federal Housing Enterprise Oversight is investigating bonuses and severance payments to former CEO Franklin Raines and former CFO Timothy Howard, both of whom left the company Tuesday night, the

Wall Street Journal

reported. The agency is worried the executives received incentive payments for accomplishments that now look questionable in light of Fannie's big earnings restatement.

According to government filings, Raines received $10.6 million in annual bonuses and $25.7 million in long-term incentive payouts in the years 2001 through 2003. Howard got $2.7 million in bonus payments and $7.4 million in long-term incentives.

Part of the money was paid as a reward for hitting financial targets including earnings milestones, feats that investigators think might not stand up after the company restates earnings for almost four years ending in September.

Last week, the

Securities and Exchange Commission

determined that Fannie's accounting for various derivative hedges was faulty and that its earnings would have to be restated downward. The company said in a filing Wednesday that its previous financial statements are no longer reliable. The restatement could total as much as $9 billion.

While Raines has no formal arrangement for severance in his current contract, there are provisions that pay him unpaid salary and part of his bonus if he retired or was terminated without cause. According to the

Journal

, OFHEO is trying to determine whether Raines and Howard were in fact terminated for cause, something that could complicate their efforts to collect.

Raines is believed to be due more than $1 million a year under the current contract.