Accounting & Tax

Call for Perjury Probe of Fannie Ex-execs

Former CEO Franklin Raines and former CFO Timothy Howard ''had an opportunity to come clean, swearing an oath to tell the truth, which I believe th...
Stephen TaubJune 15, 2006

The chairman of the House subcommittee that oversees the Federal National Mortgage Association (FNMA, or Fannie Mae) has called for a perjury investigation of its former top executives.

Rep. Richard Baker (R-La.), chairman of the Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, earlier this week revealed that he had sent a written request to Kenneth Wainstein, U.S. Attorney for the District of Columbia. In his letter, Baker asserted that in their sworn testimony before the subcommittee in October 2004, former chief executive officer Franklin Raines and former chief financial officer Timothy Howard “failed to testify truthfully in violation of applicable law.”

He asked the Department of Justice to “bring any appropriate prosecution.”

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Raines and Howard had testified regarding the company’s $10.8 billion accounting scandal. Last month, Fannie Mae agreed to pay $400 million to settle related charges with the Securities and Exchange Commission and Fannie’s federal regulator, the Office of Federal Housing Enterprise Oversight (OFHEO).

In announcing the settlement, the SEC asserted that the “root cause” of Fannie’s accounting fraud was “a corporate culture that placed significant emphasis on stable earnings growth and avoidance of income statement volatility, and insufficient emphasis on ensuring compliance with applicable accounting regulations and federal securities laws.”

“The accounting fraud at Fannie was despicable and demands punishment, but these men also had an opportunity to come clean, swearing an oath to tell the truth, which I believe the evidence shows they clearly and arrogantly flouted,” said Baker, in a statement on his website. “As subcommittee chairman, I have a strong obligation to make sure witnesses do not mislead Congress and think they can get away with it, and that’s especially so for witnesses from a company Congress created.”

Baker noted that last week, the acting director of OFHEO testified about the role of Raines and Howard in the apparent manipulation of certain accounting data that triggered maximum bonus payouts. The representative elaborated that the discrepancy between OFHEO’s findings and the sworn testimony of Raines and Howard prompted his request of the Justice Department.