Today, the SEC and the Office of Federal Housing Enterprise Oversight announced a settlement with the Federal National Mortgage Association (Fannie Mae). Fannie Mae, among other things, allegedly engaged in accounting fraud.
According to the government's complaint, Fannie Mae misapplied Generally Accepted Accounting Principles from 1998 through 2004 thereby failing to comply with SFAS 91 and SFAS 133. Fannie Mae's management also overstated revenues and understated expenses in 1998, allegedly to obtain bonuses it otherwise would not have been abole to obtain.
Without admitting liability for accounting fraud, Fannie Mae agreed to an injunction. The settlement requires Fannie Mae to re-state its historical financial statements for the years ended December 31, 2002 and 2003, and for the quarters ended June 30, 2004, and March 31, 2004. The company estimates that its restatement will result in at least an $11 billion reduction of previously reported net income. In addition, Fannie Mae will pay a $400 million penalty.
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