The move, which follows a settlement that Fannie Mae reached with securities and housing regulators three months ago, removes a significant legal threat against the company, but it was unclear today what the decision means for two former top executives who Fannie Mae fired after the $11 billion accounting scandal came to light.
A spokesman for the United States attorney for the District of Columbia, confirmed a Fannie Mae statement about the end of the investigation into the company. But the spokesman, Channing Phillips, declined to comment on whether prosecutors intend to bring criminal charges against Franklin D. Raines, Fannie’s former chief executive, and J. Timothy Howard, the company’s former chief financial officer. Lawyers for both men did not return calls today.
Fannie Mae improperly used financial reserves and deferred expenses to meet profit goals — moves that led to the payment of millions of dollars in executive bonuses, according to two comprehensive reports on the company issued earlier this year.
In May, Fannie Mae agreed to pay $400 million to settle a civil case over the accounting irregularities brought by the Securities and Exchange Commission and the Office of Federal Housing Enterprise Oversight, or Ofheo, which oversees Fannie Mae and Freddie Mac, another mortgage giant. The settlement does not prevent the federal agencies from bringing civil charges against Mr. Raines, Mr. Howard or other executives.
Legal and financial analysts said the prosecutor’s decision not to pursue charges against Fannie Mae signals that the government is heeding the lessons from its prosecution of Arthur Andersen, the large accounting firm that went out of business in 2002 after being convicted on obstruction of justice charges related to its dealings with the Enron Corporation. Last year, the United States Supreme Court overturned the conviction against Andersen.