Fannie Mae Trouble: Are Auditors At Fault?(June 9, 2006) --

In the wake of Fannie Mae agreeing to pay $400 million to resolve federal civil allegations that it massaged its books so executives could earn big bonuses, government investigators have turned their attention its accountants and auditors.

The U.S. Securities & Exchange Commission is looking into deals in which Goldman Sachs, Lehman Bros., and KPMG facilitated the income machinations.Many of Fannie Mae’s questionable transactions had to do with mortgage-backed securities.

For instance, in 2001 Goldman introduced a mortgage-backed security that it said would allow Fannie to ``better manage the recognition of income'' for accounting purposes, according to the a federal report.

The security allowed Fannie to push $107 million in income to future years, when the company expected a rise in interest rates would depress its earnings. Goldman received $625,000 in fees for one of the two transactions, which investigators insist ``had no significant purpose other than to achieve desired accounting results.''It looks like more trouble ahead for accountants.

SEC Chairman Christopher Cox said in a press conference that ``entities whose actions and inactions'' contributed to the Fannie debacle will be ``vigorously pursued.''Source: Business Week, Dawn Kopecki and Mara Der Hovanesian (06/12/2006)




Article Submitted By:
John Lopez
Budget Realty