Ex-Freddie Mac, Fannie Mae chiefs sued by SEC over loans
David Glovin and Joshua Gallu,
Dec. 16 (Bloomberg) -- Richard Syron, the former chief executive officer of Freddie Mac, and Daniel Mudd, ex-CEO of Fannie Mae, were sued by the U.S. Securities and Exchange Commission over disclosures they made about subprime loans.
Complaints were filed against the two men today in Manhattan federal court. Also sued by the regulator were Enrico Dallavecchia, who was chief risk officer for Fannie Mae; Thomas Lund, Fannie’s Mae’s former executive vice president; Patricia Cook, Freddie Mac’s former executive vice president; and Donald Bisenius, who was a senior vice president at Freddie Mac.
“This action arises out of series of materially false and misleading public disclosures,” the SEC said in the complaint filed against Syron. The agency seeks unspecified damages against the defendants. Fannie Mae or Freddie Mac aren’t named as defendants in the case.
Mudd, now CEO of Fortress Investment Group LLC, was ousted when Fannie Mae and Freddie Mac were seized by regulators in September 2008.
James Wareham, Mudd’s attorney at DLA Piper LLP in Washington, declined to immediately comment. Mark Hopson, Syron’s attorney at Sidley Austin LLP in Washington, didn’t immediately return a call seeking comment. Dallavecchia is now chief risk officer at PNC Financial Services Group.
During Mudd’s tenure as CEO of Fannie Mae, from 2004 through its government takeover in 2008, the firm ramped up its business with lower-quality mortgages. Mudd said in a 2006 interview that he planned to expand the companies’ holdings to include more higher-risk loans. Anything else would be “counterproductive,” he told investors in March of that year.
In April 2007, Mudd said in testimony before lawmakers that the firm’s exposure to subprime loans “remains minimal, less than 2.5 percent of our book.”
At the same hearing, Syron said his firm hadn’t “been heavily involved in subprime all along.”
Within 18 months, U.S. regulators seized Fannie Mae and Freddie Mac after losses on the soured loans pushed them to the brink of insolvency.