VideoSecurities and Exchange Commission Chairman William Donaldson said Tuesday that the regulatory agency is looking into whether fraud was committed at mortgage finance company Freddie Mac.
"If there is evidence of fraud…we would have a role there," Donaldson told the Senate Banking Committee, according to wire service reports. "We are looking at that right now."
Donaldson pointed out that the SEC is uninvolved in the accounting investigation being conducted by Freddie Mac's regulator, the Office of Federal Housing Enterprise Oversight (OFHEO). However, he did note that the commission's job is to investigate fraud, that Freddie Mac has agreed to voluntary registration with the SEC, and that the commission is helping the company conform with SEC registration rules on securities.
At about the same time that Donaldson was testifying, a spokesman for the House Financial Services Committee said that on October 8, the committee expects to consider legislation proposed by the Treasury Department that would strengthen OFHEO, which regulates Fannie Mae as well as Freddie Mac.
OFHEO, which is now part of the Department of Housing and Urban Development, would become a bureau of the Department of the Treasury. However, HUD would retain some authority in setting the mortgage companies' goals for affordable housing, Treasury Secretary John Snow said in testimony earlier this month, according to Dow Jones.
Last week James R. Doty, the former SEC general counsel who looked into accounting failures at Freddie Mac, said that his investigation did not reveal "rampant, criminal misconduct" at the mortgage giant, though he did cite inadequacies in the company's accounting related to derivatives.
The mortgage company said at the time that it would delay the release of its restated financials, originally expected by September 30, until November. When Freddie Mac finally issues the restatement, it could exceed $4.5 billion, the upper end of the previously announced range.
Impath Files for Chapter 11, CFO Resigns
Impath, which earlier this month announced that the SEC had launched a formal investigation into possible accounting irregularities, on Monday filed for Chapter 11 bankruptcy protection.
The cancer-data company also announced the resignation of chief financial officer James V. Agnello, effective immediately. Agnello will continue as a consultant to the company to assist in its transition period following the bankruptcy filing.
The SEC probe involves its accounts receivable as well as discrepancies relating to the amounts capitalized to date on the company's GeneBank asset.
In July, Impath said its audit committee had launched an investigation into possible accounting irregularities involving its accounts receivable, which the company believed had been overstated. At the time, the company also believed the financial impact would be material. In that same announcement, Impath added that its vice president of finance and its corporate controller had resigned.
SEC Sues Sport-Haley, Its Chairman, and a Former Controller
Sport-Haley Inc., which sells golf apparel, announced that the SEC filed suit in United States District Court against the company, chairman and former CEO Robert G. Tomlinson, and former controller Steve S. Auger.
The commission seeks an injunction against future violations and other relief, including disgorgement, civil penalties, and an order barring either Tomlinson or Auger from serving as a director or officer of any publicly held company.
The suit alleges that the defendants misrepresented inventories, period costs, and losses on the sale of headwear equipment in annual and/or quarterly financial statements for the fiscal years 1998 through 2000.
According to the SEC, Sport-Haley materially overstated inventory in its financial statements in fiscal 1998 and 1999.
Tomlinson and Auger knowingly concealed that inventory was materially overstated by $1.2 million at June 30, 1999, the commission also charged, and the two executives agreed to eliminate the overstated inventory by writing it off at the rate of $100,000 per month during the company's 2000 fiscal year.
"Sport-Haley failed to disclose the inventory overstatement or the company's elaborate measures to adjust the financial statements for the overstatement," the SEC added. "Sport-Haley materially understated expenses related to period costs in financial statements filed with the Commission during its 1998 and 1999 fiscal years and first three quarters of 2000."
The commission also accused Tomlinson and Auger of knowingly or recklessly allowing the company to materially misstate losses on the sale of headwear equipment in the company's 1999 year-end financial statements and quarterly financial statements during the first three quarters of its 2000 fiscal year. In addition, the SEC accused Tomlinson and Auger of reviewing and signing filings with the commission that they knew or were reckless in not knowing contained false financial statements.
As of yesterday, according to Sport-Haley, the defendants had not been served with a complaint, and so they had not been required to answer the allegations. They intended, however, " to vigorously defend the Commission's allegations, which [they] believe are without merit."
Reader Comments» Post a comment