Risk Management

Freddie Mac Thinks DOJ Probe’s Over

The mortgage packager and three ousted executives reportedly haven't been contacted by the Department of Justice in two years.
Stephen TaubSeptember 12, 2006

Freddie Mac says it thinks that the Justice Department is no longer investigating the company and the issues related to its massive accounting scandal, according to press reports.

Company spokesman David Palombi told the Washington Post that the U.S. attorney’s office hasn’t contacted the company “in well over two years, and it is our understanding that the matter is inactive.” Thus, he said, “we expect no further action in this matter.”

Citing sources familiar with the investigation who requested anonymity, the newspaper also reported that lawyers for three ousted Freddie Mac officials—ex-CFO Vaughn Clarke, former chief executive Leland Brendsel and ex-president David Glenn—haven’t been contacted by the Justice Department since 2004.

The DOJ doesn’t regularly tell companies and individuals that an investigation has been terminated and that no action will be taken. Thus, targets of probes must often determine that they’re no longer in legal jeopardy based solely on the time elapsed since investigators last sought information or contacted the targets for other reasons. In other words: no news is good news.

In recent weeks Freddie Mac tried to learn from the DOJ whether the fact that it hadn’t heard from the department in a long while meant that the case was closed, according to the Post. The idea might have even more credence given the DOJ’s statement in August that it had closed its criminal probe of accounting problems at Freddie Mac, a similar company in a similar situation to Fannie Mae.

“It is Freddie Mac’s understanding that it is the practice of the U.S. attorney’s office for the Eastern District of Virginia neither to issue official notices nor to confirm publicly the conclusion of an investigation,” Palombi told the paper.

A spokesman for Chuck Rosenberg, U.S. attorney for the Eastern District of Virginia told the paper, “We cannot comment on that issue.”