- The Washington Times - Tuesday, August 31, 2004


A federal judge has ordered that $60 million in compensation cannot be withheld from an ousted chief executive officer of Freddie Mac, in a setback to federal regulators seeking to strip him of the money for what is believed to be his 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 Mr. Brendsel and former President David Glenn. In addition, the agency has asked for restitution of $3.8 million from Mr. Brendsel and $537,000 from Mr. Clarke as well as civil fines of $5.8 million and $2.6 million from Mr. Brendsel and Mr. Clarke, respectively.

Corinne Russell, a spokeswoman for OFHEO, said yesterday that the agency was reviewing the judge’s ruling with the Justice Department. She declined further comment. It wasn’t immediately clear whether the agency could appeal the ruling.

Mr. 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 accusations.

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-based Freddie Mac, the second-largest U.S. buyer of home mortgages, of violating its public trust. They blamed misconduct by management — including Mr. Brendsel and Mr. Clarke — for the $5 billion misstatement of earnings for 2000-2002.

Freddie Mac’s settlement still left to be resolved a criminal probe by the Justice Department and a civil inquiry by the Securities and Exchange Commission.

Although Mr. Brendsel and Mr. 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 time to review Judge Leon’s ruling, thus had no immediate comment.

Mr. Brendsel’s attorneys handling the compensation case didn’t immediately return telephone calls seeking comment.

A year ago, OFHEO ordered the ouster of Mr. 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 former Federal Reserve official, as its new leader.

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