Three former executives of Freddie Mac have settled charges that they lied about the government-sponsored enterprise's exposure to subprime mortgages before the market collapsed.
The former executives will pay a total of $310,000 and will face temporary employment restrictions under the settlement with the Securities and Exchange Commission, according to a court filing Tuesday by U.S. District Court Judge Richard Sullivan of the Southern District of New York.
The SEC had accused former Freddie Mac Chief Executive Richard Syron, former investments and capital markets executive Patricia Cook and former credit executive Donald Bisenius of drastically understating the GSE's subprime exposure during 2007 and 2008.
The SEC's complaint said Syron and Cook claimed Freddie had "basically no subprime exposure" when, in fact, it was actively expanding its subprime portfolio to more than $200 billion.
The three ex-executives did not admit they did anything wrong under the settlement. "[W]ithout conceding the strengths or weaknesses of their respective claims or defenses," the former execs and the SEC settled the case "in the interest of justice," the settlement order said.
The settlement calls for Syron to pay $250,000, Cook $50,000 and Bisenius $10,000. It also effectively prohibits each from serving as a chief executive or chief financial officer by forbidding them from signing documentation required by those jobs under the Sarbanes-Oxley Act. Syron will be prohibited for two years, Cook for 18 months and Bisenius for one year.
SEC Enforcement Director Andrew Ceresney said in an email that "[t]he settlement's limitations on future activities and financial payments reflect an appropriate resolution of the matter."
In a statement emailed by his law firm, Sidley Austin, Syron said he is "deeply relieved and gratified" by the resolution.
"The agreement states that it is not in the interests of justice to continue to litigate this matter, and I wholeheartedly agree with that sentiment," the statement read.
Expediency was also a consideration in ending the fight. The two sides agreed that that continuing the fight would mean at least two more years of litigation, after it has already dragged on for more than three years, the order said.