A federal court ruling in Washington may prove to be a windfall for former Freddie Mac chief executive officer Leland Brendsel, who led the federal mortgage packager for 18 years before leaving the company in June 2003.
U.S. District Court Judge Richard Leon ruled that Freddie Mac’s regulator, the Office of Federal Housing Enterprise Oversight (OFHEO), was “simply overreaching” in its assertion that it had the right to freeze more than $50 million in Brendsel’s compensation as a result of an investigation into a $5 billion profit restatement, according to Bloomberg. The agency’s action would have reportedly involved Brendsel’s salary, a 2003 bonus, stock options, and other grants.
OFHEO is “reviewing the court’s decision with the Justice Department,” said Corinne Russell, a spokeswoman for the agency. She reportedly declined to say whether the office would appeal. Sharon McHale, a spokeswoman for Freddie Mac, which is based in McLean, Virginia, declined to comment, the news service reported.
The regulator said in December that Brendsel, former Freddie Mac president David Glenn, and former chief financial officer Vaughn Clarke were largely responsible for manipulating accounting, understating earnings, and setting “an inappropriate tone at the top,” according to Bloomberg. Brendsel and Clarke quit in June 2003, and Glenn was fired that month.
In November, Freddie Mac restated earnings from 2000 until 2002 so that they were higher by $5 billion. Clarke reportedly sued the oversight office last month after it ordered Freddie Mac to withhold $1.1 million in pay, bonuses, and stock, in a case in which Judge Leon is also presiding.
Brendsel pointed to an “unlawfully imposed freeze on compensation” in his lawsuit against OFHEO in March, according to the report. The agency’s action was an “unconstitutional violation of due process,” he reportedly asserted.