Fannie Mae Report Fingers CFO InAccounting Scandal

WASHINGTON - (02/24/06) – A special report on theaccounting scandal at Fannie Mae implicated the company’schief financial officer and controller as mainly responsible forthe accounting failures at the mortgage giant now struggling toemerge from an $11 billion scandal. The report by a team ofinvestigators led by former Sen. Warren Rudman concluded that thecompany manipulated the finances behind its huge derivativesportfolio to manage its earnings. The investigators also found thatformer chairman and CEO Franklin Raines, while not sharing directresponsibility, contributed to a culture of arrogance at thegovernment-sponsored company. Raines’ lawyers released astatement Thursday saying the former CEO relied on the expertopinion of his CFO Timothy Howard, and controller Leanne Spencer,and of his auditors, both internal and external, when he signed offon the books. The report found that Howard, known throughout theindustry as a wizard in the mortgage backed bond market, andSpencer manipulated the huge cash flow underlying their hedgingportfolio to manage their financial statements to both meet WallStreet expectations and to qualify top management for bonuses.Conclusions were similar to previous reports about FannieMae’s accounting scandal conducted by OFHEO, thecompany’s main regulator, and did not turn up any newevidence of wrongdoing.