Freddie's back

9 June 2003

The US mortgagefinance company has questioned David Glenn’s conduct in cooperating with auditors. This may not have all the makings of a damaging scandal. But until it is resolved it could depress sentiment across credit markets.

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Freddie Mac said on Monday that it had fired its president and chief operating officer David Glenn because of "serious questions about the timeliness and completeness of his cooperation and candor with the board's audit committee counsel."

The US company, which buys loans in bulk from mortgage lenders and issues securities backed against them, said in January it would revise up its earnings for the previous two years. New auditors recommended it change some accounting policies. The changes are expected to slow the rate at which the company grows earnings in the future.

Armando Falcon, director of the office of federal housing oversight, which regulates Freddie Mac, wrote to the company's board over the weekend alleging management misjudgments that led to a misapplication of GAAP principles and disclosures of employee misconduct, specifically, altering and failing to supply documents relevant to the restatement process.

Freddie Mac also said that its chief executive Leland Brendsel and chief financial officer Vaughn Clarke had resigned.

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