SEC settles with two ex-Fannie Mae execs

New York

THE US Securities and Exchange Commission (SEC) has reached a settlement with two former Fannie Mae executives in one of its biggest lawsuits tied to the global financial crisis, but has yet to settle with former chief executive Daniel Mudd.

Former chief risk officer Enrico Dallavecchia and former executive vice-president Thomas Lund will pay US$25,000 and US$10,000 respectively to settle charges that they helped conceal Fannie Mae's exposure to more than US$100 billion of subprime and US$341 billion of low-documentation "Alt-A" home loans.

Both denied wrongdoing and agreed to cooperate with the SEC in its case against Mudd, which could increase pressure on him to settle. The SEC said that case could last another year. The settlement was approved on Monday by US District Judge Paul Crotty in Manhattan.

Mudd's lawyer John Keker, of Keker & Van Nest, did not immediately respond to requests for comment. SEC spokesman John Nester declined to comment.

Monday's settlement means the SEC has been unable to extract major penalties against five of the six former top executives it sued at Fannie Mae and Freddie Mac. The government seized both mortgage finance companies on Sept 7, 2008 and put them into a conservatorship under the Federal Housing Finance Agency, where they remain.

In April, former Freddie Mac chief executive Richard Syron, chief business officer Patricia Cook and vice- president of credit policy Donald Bisenius agreed to pay a combined US$310,000 to resolve the SEC case against them.

Michael Levy, a Paul Hastings partner representing Lund, said his client did nothing wrong. "Tom Lund has been vindicated," he said. "After investigating for three years, litigating for another three years, deposing 50 witnesses and hiring four experts, the SEC concedes that it has not prevailed."

Andrew Levander, a partner at the Dechert firm representing Dallavecchia, said he was pleased to reach a settlement that leaves the SEC's "baseless charges" behind. "Mr Dallavecchia's conduct was entirely proper," he said. REUTERS