Posted by Jack Lee
Franklin Delano Raines is the former chairman and chief executive officer of Fannie Mae who served as White House budget director under President Bill Clinton.
In October 2003, even as Raines was invited to the Bush White House to receive a leadership award on behalf of Fannie Mae, investigators were about to look into the company’s accounting books. A year later, Congress held a hearing on accounting irregularities at the company. By the end of 2004, Raines was forced out by the board, accused by regulators of overseeing accounting manipulations to bolster his compensation.
He cooked the books to get bonus money
The son of a Seattle janitor, Raines graduated from Harvard University, Harvard Law School; and Magdalen College, Oxford University as a Rhodes Scholar. Raines was of age during the Vietnam War, but performed no military service. He served in the Carter Administration as associate director for economics and government in the Office of Management and Budget and assistant director of the White House Domestic Policy Staff from 1977 to 1979. Then he joined Lazard Freres and Co., where he worked for 11 years and became a general partner. In 1991 he became Fannie’s Mae’s Vice Chairman, a post he left in 1996 in order to join the Clinton Administration as the
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Director of the U.S. Office of Management and Budget, where he served until 1998. In 1999, he returned to Fannie Mae as CEO, “the first black man to head a Fortune 500 company.”
On December 21, 2004 Raines accepted what he called “early retirement” [3] from his position as CEO while U.S. Securities and Exchange Commission investigators continued to investigate alleged accounting irregularities. He is accused by The Office of Federal Housing Enterprise Oversight (OFHEO), the regulating body of Fannie Mae, of abetting widespread accounting errors, which included the shifting of losses so senior executives, such as himself, could earn large bonuses.
In 2006, the OFHEO announced a suit against Raines in order to recover some or all of the $50 million in payments made to Raines based on the overstated earnings [5] initially estimated to be $9 billion but have been announced as 6.3 billion.
Civil charges were filed against Raines and two other former executives by the OFHEO in which the OFHEO sought $110 million in penalties and $115 million in returned bonuses from the three accused.[7] On April 18, 2008, the government announced a settlement with Raines together with J. Timothy Howard, Fannie’s former chief financial officer, and Leanne G. Spencer, Fannie’s former controller. The three executives agreed to pay fines totaling about $3 million, which will be paid by Fannie’s insurance policies. Raines also agreed to donate the proceeds from the sale of $1.8 million of his Fannie stock and to give up stock options. The stock options however have no value. Raines also gave up an estimated $5.3 million of “other benefits” said to be related to his pension and forgone bonuses.
An editorial in The Wall Street Journal called it a “paltry settlement” which allowed Raines and the other two executives to “keep the bulk of their riches.” In 2003 alone, Raines’s compensation was over $20 million.
Wikipedia.