Fannie Mae execs lied, lawmaker says

Deseret News (Salt Lake City), Jun 15, 2006 by Associated Press

WASHINGTON -- A senior House lawmaker has asked the Justice Department to investigate whether Fannie Mae's then-chief executive and finance chief lied to Congress in sworn testimony in 2004.

Rep. Richard Baker, R-La., chairman of the House panel that oversees the government-sponsored mortgage finance company, disclosed Wednesday that he had made a perjury referral regarding former Fannie Mae chief executive Franklin Raines and former chief financial officer Timothy Howard.

The department has been conducting a criminal investigation of Washington-based Fannie Mae, the largest financer and guarantor of home mortgages in the country.

The company's $11 billion accounting scandal came to light in September 2004. Federal regulators found serious accounting problems and alleged that there was a pervasive pattern of earnings manipulation and lax internal controls. The next month, Raines and Howard testified at a hearing before Baker's panel, the House Financial Services subcommittee on capital markets.

They were asked about an episode in 1998 in which Fannie Mae was said to have improperly put off accounting for $200 million in expenses to future periods so that executives could collect $27 million in bonuses.

Raines testified that "there was no decision made" to defer the accounting for expenses. Howard and Raines both denied that they made accounting decisions with the aim of hitting earnings targets to ensure they received full bonuses.

"It is my belief that Mr. Franklin Raines and Mr. Timothy Howard, while testifying under oath . . . on Oct. 6, 2004, failed to testify truthfully, in violation of applicable law," Baker said in a letter dated Tuesday to Kenneth Wainstein, the U.S. attorney for the District of Columbia.

"I request that the Department of Justice conduct an investigation and bring any appropriate prosecution," Baker wrote.

Attorneys representing Raines and Howard did not immediately return telephone calls Wednesday.

The two executives were swept from office by Fannie Mae's board in December 2004.