In the face of damning charges against Fannie Mae, the mortgage giant's board of directors has retained outside counsel while confirming reports that the company is being accused by its regulator of serious accounting improprieties.In a statement released Wednesday morning by presiding director Ann McLaughlin Korologos, the board said the Office of Federal Housing Enterprise Oversight has questioned the "validity of previously reported financial results, the adequacy of regulatory capital, [and] the quality of management supervision," as well as the "overall safety and soundness" of the congressionally chartered company. As of MortgageWire's deadline, Fannie's stock was trading down almost 7%, at $70.45. Fannie Mae initially had no comment Wednesday on the board's statement regarding OFHEO's allegations. Later in the morning company chairman and chief executive Franklin Raines said publicly that the company's management "strongly supports the leadership shown by the nonmanagement members" of its board. Moreover, late Tuesday night Fannie Mae said outside director Anne Mulcahy, chief executive of Xerox Corp., had resigned. [See item below.] She has been a director since 2000 and was recently asked to join the board of Citigroup. Meanwhile, the board's Wednesday morning statement did not offer financial guidance regarding a potential earnings restatement, should it come to that. The board said it hired former Sen. Warren Rudman of Paul, Weiss, Rifkind, Wharton & Garrison to serve as its counsel. Last year Freddie Mac had to restate earnings by $5 billion because of accounting improprieties.

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