DECEMBER 19, 2006
Years after disgracefully resigning amid scandal, federal regulators have charged Bill Clinton’s budget director for manipulating earnings to increase his hefty bonus when he headed the giant government-sponsored mortgage company Fannie Mae.
Franklin Raines submitted misleading and inaccurate accounting statements and inaccurate capital reports that enabled him to grow Fannie Mae in an unsafe and unsound manner, according to the 153-page notice of charges filed by the Office of Federal Housing Enterprise Oversight.
Raines, Fannie Mae’s Chairman and Executive Officer for about six years, and two other executives must answer to more than 100 charges and may have to return $115 million in bonuses and pay $100 million in penalties. Raines and his cohorts resigned in 2003 when the Fannie Mae scandal became public.
Raines’ corrupt methods were detailed in a 211-page report published a few years ago by the Office of Federal Housing Enterprise Oversight, Fannie Mae’s regulator. The report says, in part, that Raines and his executives committed “pervasive and willful” earnings manipulation, lax controls, perverse incentives and unjust bonuses. It lead to an inquiry by the Securities and Exchange Commission and a Department of Justice criminal investigation.
A Harvard University graduate and the first black to head a Fortune 500 company, Raines thought that his strong political connections could help him crawl out of his professional hole and perhaps allow him to make a comeback. Instead, he was forced into early retirement at the age of 55, which one business publication called “an inglorious end to a charmed career.”
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