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Freddie Mac to Oust CEO, Counsel

The move comes at the request of regulators amid an accounting investigation at the mortgage corporation.

August 23, 2003|From Associated Press

WASHINGTON — The chief executive of Freddie Mac and the corporation's general counsel will be replaced at the request of federal regulators as an investigation continues into the beleaguered mortgage giant's accounting practices.

Armando Falcon, head of the Office of Federal Housing Enterprise, said Friday that based on a review of the conduct of senior Freddie Mac officials, he had recommended the removal of Freddie Mac CEO Gregory Parseghian and general counsel Maud Mater.

Falcon said in a statement that federal regulators would work with the corporation to ensure a smooth transition.

Freddie Mac, the second-largest player in the multitrillion-dollar home mortgage market, has been under fire since disclosing this year that accounting errors and manipulations of internal accounts had resulted in the company's underreporting of earnings by $1.5 billion to $4.5 billion over the last three years.

Parseghian had been chief executive and president of Freddie Mac only since June. He was selected after the mortgage giant ousted three top executives following the disclosure of the accounting problems.

However, Parseghian had been dogged by questions over his role in the accounting transactions, which have triggered investigations by the Justice Department and the Securities and Exchange Commission.

Several lawsuits have been filed by shareholders since the company's troubles came to light. In one of those suits, Parseghian is alleged to have improperly sold Freddie Mac stock.

But this month Parseghian said, "I have nothing to hide here. There are only three occasions on which I have ever sold Freddie Mac stock and I remain heavily invested in the company."

Falcon, in a letter to Shaun F. O'Malley, chairman of Freddie Mac's board of directors, said Parseghian could stay on as head of Freddie Mac during a search for his successor.

But he said federal regulators wanted the search conducted "expeditiously."

Falcon said the terms of Parseghian's severance package and those of the compensation package for Mater would be reviewed by his office.

"The board's compliance signals a commitment to cooperation and to ensuring the continued safe and sound operation of the corporation," Falcon said in his letter.

Freddie Mac, a $40-billion-a-year company with its headquarters in the Washington suburb of McLean, Va., is ranked No. 32 on Fortune's list of the 500 largest corporations in America.

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