WASHINGTON — Three former top executives at Fannie Mae will pay $31 million under a settlement announced Friday by the agency that oversees the federal housing giant, resolving claims they manipulated earnings to boost their own bonuses.
The $31 million settlement is far less than the more than $200 million that regulators had sought when they brought the administrative action in late 2006.
Former Chief Executive Franklin Raines will pay $24.7 million, former chief financial officer Timothy Howard will pay $6.4 million and former controller Leanne Spencer will pay $275,000, the Office of Federal Housing Enterprise Oversight, or Ofheo, announced.
Raines and Howard both stepped down in late 2004; Spencer left in 2005. Ofheo, filed the administrative action in 2006, alleging that the executives inflated Fannie's earnings to increase their own bonuses, deceiving Fannie's investors and regulators in the process. Ofheo sought to compel the former executives to return about $115 million of bonuses and pay fines totaling more than $100 million.
Under the settlement, Raines will pay $2 million to the U.S. government, surrender claims to stock options that were valued at $15.6 million when issued, and turn over an estimated $5.3 million of other benefits. Additionally, Ofheo's settlement with Raines calls for proceeds from the sale of $1.8 million of sales of Fannie Mae stock to be donated to homeowner-assistance programs approved by Ofheo.
Howard is to turn over $750,000 and surrender claims to stock options that had been valued at $5.2 million. Spencer will pay $275,000 and waive any claims for compensation against Fannie Mae, Ofheo said.
The settlement also precludes the former executives from working for Fannie Mae or receiving any compensation from it.
Fannie Mae itself paid a $400 million settlement in May 2006 to resolve complaints by Ofheo and the Securities and Exchange Commission, without admitting or denying their allegations of accounting fraud.
Lawyers for Raines, who had been budget director under President Bill Clinton, tried but failed to have the case moved from the administrative court to a federal court.
Freddie Mac, another government-sponsored enterprise that buys and sells home mortgages, paid a $125 million settlement to Ofheo in 2003 and paid a $50 million settlement last year to the SEC. Freddie's former CEO Leland Brendsel agreed in November to pay a $16.4 million settlement to Ofheo. Ofheo originally had sought to have Brendsel return more than $50 million of his compensation.
