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Fannie Mae's cooked books

Published Feb. 25, 2006

Internal rot has been found in the house that Fannie Mae built.

A new report details how top managers at the home mortgage finance giant manipulated the books so they could secure generous bonuses for themselves. The tale is almost cliche at this point, with so many corporate accounting scandals erupting in recent years with the same script. But it is still disgusting to see how easily corporate leaders let avarice get the better of them, and how willing they are to cheat their companies and shareholders.

After an 18-month investigation, a team of lawyers and investigators including former Sen. Warren Rudman found that Fannie Mae's top executives cooked the books so it appeared that they had met earnings projections. That enabled them to qualify for more than $27-million in bonus payments.

When a thief steals a few hundred dollars from a bodega cash register, he is considered a menace to society. So too are those involved in a plan that results in the siphoning off of millions in undeserved compensation.

This investigation should not end with the executives simply being asked to repay the excess bonuses. It is expected that later this year, Fannie Mae will have to restate $11-billion of claimed earnings. That's not chicken feed. The company's executives were not giving the board or shareholders an accurate financial picture.

The Department of Justice and the Securities and Exchange Commission are independently looking into the executives' machinations. If a criminal case can be made, it should.