Freddie Earnings in Question

Freddie Mac has received a notice from the staff of the Securities and Exchange Commission that the agency is considering enforcement actions against the mortgage giant for underreporting its earnings by $5 billion.The Wells notice cites possible violations of federal securities laws and gives Freddie Mac officials an opportunity to respond before SEC staff present their recommendations to the commission for final action. "The Wells notice indicates that in connection with the contemplated action, SEC staff may seek a permanent injunction and a civil money penalty,' Freddie Mac said in disclosing the Wells notice. In December, the Office of Federal Housing Enterprise Oversight imposed a $125 million civil penalty on Freddie Mac for engaging in inappropriate conduct and earnings management. Last summer, Freddie Mac's board of directors admitted senior executives manipulated earnings reports to show steadily increasing profits over several years. The $5 billion accounting scandal led to the ouster of three top executives and the publicly traded company restated its earnings for 2000, 2001 and 2002. Freddie Mac finally released its 2003 financial results on June 30.