In addition to placing much of the blame for the improper accounting on former Freddie Mac executive David Glenn, last week's release of a investigative report on the GSE made repeated references to former Freddie Chairman Leland Brendsel as an active participant in the accounting irregularities.
The much-anticipated report was prepared by Baker Botts LLP, who was special counsel to the outside directors of Freddie Mac's Board of Directors. The report reviewed the facts and circumstances pertaining to some of the principal accounting errors that were identified during the firm's previously announced restatement process.
Subsequent comments suggested this report contained some surprises as well as confirmed the board's preliminary findings. In addition to Brendsel's involvement, the mainstream press last week focused on the outline of tape-recorded conversations with traders in the GSE's funding and investments division and counterparties to derivative transactions. The conversations showed that traders were being asked questions about transactions that would defer income recognition, but the answers were not really candid.
Meanwhile, despite the negative headlines about Freddie, Fitch Ratings said it maintains the GSE's subordinated debt rating of AA' and preferred stock rating of AA' following the release of the internal investigation report to Freddie's Board of Directors.