SEC Settles With Former Freddie Mac Executives

The Securities and Exchange Commission has settled a crisis-era suit that accused three former executives of mortgage firm Freddie Mac of downplaying the risks of the firm's foray into subprime loans, according to a court order Tuesday.

The case involved former Freddie Mac Chief Executive Richard Syron, former business chief Patricia Cook and former vice president Donald Bisenius.

As part of the settlement, the executives have agreed to donate or have donated on their behalf amounts ranging from $10,000 to $250,000. The amounts are proportional to the executives' stock and option awards during the 2006 and 2007 fiscal years, the order states.

In 2011, the SEC filed civil suits in Manhattan federal court against six former executives at mortgage firms Freddie Mac and Fannie Mae. At the time, the civil lawsuits ranked among the highest-profile crisis-related cases the government had brought.

At the heart of the lawsuits was the government's contention that Fannie and Freddie executives knowingly misled investors about the volumes of risky mortgages that the companies were purchasing as the housing boom turned to bust. The Fannie Mae case is ongoing.

The SEC originally had sought financial penalties, disgorgement and an order barring the former executives from serving as officers and directors of other companies.

Tuesday's court order said that the SEC and Freddie Mac executives agreed that it was "not in the interest of justice" to continue litigating the matter, "without conceding the strengths or weaknesses of their respective claims and defenses."

"The settlement's limitations on future activities and financial payments reflect an appropriate resolution of the matter," said Andrew Ceresney, director of the SEC's division of enforcement.

Mr. Bisenius said in a statement that he has agreed not to make certifications required of CEOs and CFOs of public companies for a limited period of time.

"I am gratified that the SEC has agreed to end its case against me," he said. "The dismissal of the case today under these terms vindicates me completely."

Ms. Cook's attorney, Steven Salky, said in a statement that insurance will cover her required $50,000 donation. "Extensive discovery of facts led to this favorable outcome," Mr. Salky said in the release.

Mr. Syron's attorney didn't immediately respond to a request for comment.

Write to Chelsey Dulaney at [e-mail]

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