SEC accuses former Fannie Mae, Freddie Mac bosses with fraud

The following article is brought to you by Jim Puzzanghera at LATimes.Com.

Six former top executives of housing finance giants Fannie Mae and Freddie Mac were accused of securities fraud Friday by federal regulators for allegedly misleading investors about the size of the companies’ risky subprime mortgage holdings.

Among those in the SEC’s civil action were former Fannie Mae Chief Executive Daniel H. Mudd and former Freddie Mac Chief Executive and Chairman Richard F. Syron. They are two of the highest-ranking figures to face charges in the wake of the financial crisis.

Fannie Mae and Freddie Mac executives told the world that their subprime exposure was substantially smaller than it really was,” said Robert Khuzami, director of the SEC’s Enforcement Division. “These material misstatements occurred during a time of acute investor interest in financial institutions’ exposure to subprime loans, and misled the market about the amount of risk on the company’s books.”

The charges, filed in the U.S. District Court for the Southern District of New York, allege that the Fannie Mae executives made misleading statements, or aided and abetted others making those statements, between December 2006 and August 2008.

In addition to Mudd, who headed Fannie Mae from 2005-2008, the other Fannie Mae executives charged were former Chief Risk Officer Enrico Dallavecchia and Thomas A. Lund, former executive vice president of the company’s single-family mortgage business.

The Freddie Mac officials face charges for misleading statements the company made between March 2007 and August 2008. The executives include Syron, who headed Freddie Mac from 2003 to 2008, Patricia L. Cook, former executive vice president and chief business officer, and Donald J. Bisenius, former executive vice president for the single family guarantee business, the SEC said.

Khuzami said that “all individuals, regardless of their rank or position, will be held accountable for perpetuating half-truths or misrepresentations about matters materially important to the interest of our country’s investors.”

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