Fannie Sues KPMG for $2 Billion Over Accounting Mistakes

by Mike Bevel, CollectionIndustry.com

So, ultimately, who?s at fault for the Fannie Mae accounting scandal of 2004? If you guessed ?Fannie Mae? ? because it was Fannie Mae executives who got all creative with the digits in order to trigger bonuses for themselves from 1998 to 2004 ? you?d be wrong.

I mean, existentially you?d be right; however, according to Fannie Mae and its recent law suit, its old accounting firm KPMG was more responsible for catching Fannie Mae breaking the law than Fannie Mae was in, you know, not breaking the law.

“For more than thirty years, Fannie Mae turned to KPMG to analyze its accounting policies and perform that critical watchdog function,” the mortgage giant said in its complaint. “Instead of placing ‘special emphasis’ on key accounting policies, as it had promised, KPMG often did nothing more than rubber stamp Fannie Mae’s internal accounting decisions.”

Fannie’s regulator, the Office of Federal Housing Enterprise Oversight (OFHEO), supported the company’s legal move on Tuesday.

OFHEO director James Lockhart said in a statement that the suit “is appropriate and consistent with the findings of OFHEO’s Special Examination reports.”

Last week, Fannie restated multiple years of results, cutting retained earnings by $6.3 billion through the middle of 2004.