Fannie Seeks $2B in Damages From KPMG

Fannie Mae filed a $2 billion civil complaint Dec. 12 against its former outside auditor, KPMG LLP, accusing the firm of negligence and breach of contract.The congressionally chartered mortgage giant says because of KPMG's actions, it suffered more than $2 billion in damages and had to pay more than $1 billion (and counting) to restate its books. (Fannie Mae recently restated prior years' earnings downward by $6.3 billion.) Fannie's accounting scandal broke wide open in 2004 and resulted in the ouster of its former chairman and chief executive Franklin Raines and chief financial officer Timothy Howard. Investigators later found that the company violated a host of accounting rules involving hedging, amortization and other matters. The government-sponsored enterprise charges that KPMG's "repeated assurances" to its audit committee "have proven to be dramatically wrong," noting that it has been forced to restate financials to correct more than 30 accounting errors that the firm missed or "affirmatively approved." At deadline time, KPMG had not yet commented on the lawsuit.