WASHINGTON - The chief executive of Freddie Mac and the corporation's general counsel are being replaced at the request of federal regulators as an investigation continues into the embattled mortgage giant's accounting practices.
Armando Falcon, head of the Office of Federal Housing Enterprise, said Friday that based on a review of the conduct of senior Freddie Mac officials, he had recommended removal of Freddie Mac chief executive Gregory Parseghian and general counsel Maud Mater.
Shaun O'Malley, chairman of the Freddie Mac board, said in a statement that after a discussion with regulators, the board had agreed that "it is now in the interest of the company to accede" to Falcon's directive.
Freddie Mac, the second-largest player in the multitrillion-dollar home mortgage market, has been under fire since disclosing that accounting errors and manipulations of internal accounts had resulted in the company's underreporting earnings by $1.5-billion to $4.5-billion over the last three years.
Parseghian had been chief executive officer and president of Freddie Mac only since June. He was selected after the mortgage giant ousted three top executives following disclosure of the accounting problems. In 2001, while serving as the company's chief investment officer, he had earned $1-million in salary and $750,000 in bonuses.
However, Parseghian had been dogged by questions about his role in the accounting transactions, which have triggered investigations by the Justice Department and the Securities and Exchange Commission.
In a statement issued late Friday, Parseghian said "Freddie Mac is a great company with a bright future" and he was committed "to ensuring a successful leadership transition."
Several lawsuits have been filed by shareholders since Freddie Mac's troubles came to light. In one of those suits, Parseghian is alleged to have improperly sold Freddie Mac stock.
But earlier this month, Parseghian said in a statement that "I have nothing to hide here. There are only three occasions on which I have ever sold Freddie Mac stock and I remain heavily invested in the company."
Falcon, in a letter to board chairman O'Malley, said Parseghian could stay on as head of Freddie Mac while a search for his successor was conducted. But he said federal regulators wanted the search conducted "expeditiously."
