Home mortgage giant FannieMae admitted Wednesday it had overstated earnings by nearly $8 billion, two years after an accounting scandal forced the company to review nearly a decade’s worth of annual earnings statements.
The company has scheduled a 1 p.m. conference call today to explain its restatement. The restatement — the first filing of the company’s earnings since an accounting scandal erupted in late 2004 — was posted on the Securities and Exchange Commission Web site.
Fannie Mae is publicly funded and publicly traded. Nearly 5,000 people in the Washington area work at the company.
The firm paid a record $400 million fine in May after a federal investigation found that its executives manipulated the company’s earnings to boost stock prices and win bonuses.
In 2003, its sister agency, Freddie Mac, paid $125 million to settle charged that it misstated its earnings by almost $5 billion.
Federal regulators blasted a culture of corruption at the lenders.
“Our examination found an environment where the ends justified the means,” Office of Federal Housing Enterprise Oversight acting Director James B. Lockhart said in May when the Fannie Mae fine was announced. “Senior management manipulated accounting, reaped maximum, undeserved bonuses and prevent the rest of the world from knowing.”
The scandal forced out two of Fannie Mae’s top executives, Chief Executive Officer Franklin D. Raines and Chief Finance Officer J. Timothy Howard, who were paid hundreds of millions of dollars in bonuses from 1998 until 2003. Many of the bonuses were tied to the company’s ability to meet earnings-per-share targets.
Both men walked away with multimillion-dollar severance packages, which led federal regulators to propose new rules on getting back money from executives fired for cause.
The scandal also forced the company to hire an army of auditors to reopen its books. Fannie Mae announced last month that the audit could cost nearly $1 billion.
