WASHINGTON – Freddie Mac's restated financial results have been expected since January when the housing Government Sponsored Enterprise first announced previous undetected accounting problems resulted in an understatement of its net income for a three year period. But when the cumulative total understatement of net income was announced Nov. 21, it was more than anticipated. Freddie Mac's announced $5 billion figure included $4.4 billion for expected restatements in 2000, 2001, and 2002, and an additional $0.6 billion related to periods before 2000. The expected restated figure was in the $4.5 billion range. The company's restated $5 billion net income totaled $3.7 billion in 2000, $3.2 billion in 2001, and $10.1 billion in 2002. The previously reported net income figures for the three years were $2.5 billion, $4.1 billion, and $5.7 billion, respectively. In announcing the restated figures which were originally scheduled to be released by the GSE Sept. 30 – that date was pushed back because the company said it wanted to "guarantee the integrity of the process" – Freddie Mac Chairman Shaun O'Malley called the restatement "a significant step in Freddie Mac's progress toward achieving accurate and timely financial reporting and controls." In June, amidst questions concerning the accounting errors that prompted the restatement, Freddie Mac began a series of moves to restore the tarnished reputation of the GSE, including firing its president and COO, and making other key leadership changes as well. In addition to the termination of employment of its president/COO David Glenn, the board announced the retirements of Leland Brendsel as chairman and CEO and his resignation from the board, and Vaughn Clark, evp-CFO. Gregory Parseghian, formerly evp-single family, was elected president/CEO. In addition, Paul Peterson, evp, was named COO; Martin Baumann, evp-finance, was appointed CFO; and O'Malley was elected board chairman. In August, Freddie's regulator, the Office of Federal Housing Enterprise Oversight (OFHEO) directed the GSE to replace Parseghian and begin a search for his successor after the regulator learned that Parseghian was "directly involved" with the questionable accounting practices. At press time, that search was continuing, and Parseghian remains in the position. Meanwhile on Capitol Hill, hearings were held by the House Financial Services Committee and testimony from heard was several key officials, including Secretary of the Treasury John Snow, on recommendations and legislation introduced to transfer the regulation of the housing GSEs to a new Federal agency under Treasury. The U.S. Senate Committee on Banking, Housing, and Urban Affairs in October also conducted its own hearing on "Proposals for Improving the Regulation of the Housing GSEs." The company said it plans to release quarterly and full-year 2003 results by June 30, 2004, and to provide its 2003 annual report and hold its related stockholders' meeting "as soon as practicable thereafter." -


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