Gov't Won't Prosecute Fannie Mae Over Accounting Problems

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Fannie Mae (FNM), the government-sponsored mortgage lending giant, won't face criminal charges over its multibillion-dollar accounting irregularities, the U.S. attorney's office said Thursday after two years of investigation.

"We have informed them that we are declining all charges against the company," said Channing Phillips, spokesman for U.S. attorney Kenneth Wainstein.

He confirmed the news announced earlier Thursday by Fannie Mae, which helps finance one of every five home loans in the United States.

In May, the company agreed to settlements with the Securities and Exchange Commission and the Office of Federal Housing Enterprise Oversight over accounting problems and what regulators said was earnings manipulation by the company.

Earlier this month, Fannie Mae said it hoped to complete a multibillion-dollar restatement of its 2004 earnings by the end of this year. The company has not filed an earnings statement since late 2004.

The company acknowledged then — after its independent auditor, KPMG, refused to sign off on its earnings report — that some of its accounting practices didn't comply with generally accepted accounting principles.

By the end of 2004, Franklin Raines, who had been President Clinton's White House budget director, was forced out as Fannie Mae's chief executive, along with Timothy Howard, the lending giant's chief financial officer.

Justice Department officials have never publicly confirmed that any Fannie Mae executives were also under investigation in the case.

One knowledgeable Justice official said Thursday that it was not expected that any individuals would be charged. This individual requested anonymity because, while the investigation of the company has been closed, the overall investigation has not yet been officially closed.