Freddie Mac 2004 Annual Report Download - page 216

On August 18, 2004, Freddie Mac announced that it had received a ""Wells Notice'' from the staÅ of the
SEC. The Wells Notice advised the company that the SEC staÅ is considering recommending that the SEC
initiate a civil injunctive action against the company for possible violations of federal securities laws, including
Section 10(b) of the Securities Exchange Act of 1934 and the SEC's Rule 10b-5, as well as Sec-
tions 17(a)(1), (2) and (3) of the Securities Act of 1933. The Wells Notice also indicated that the SEC staÅ
may seek a permanent injunction and a civil money penalty in connection with the contemplated action.
Freddie Mac continues to cooperate fully with the SEC's investigation as the company evaluates its response
to the Wells Notice.
U.S. Attorney's Investigation. In June 2003, the U.S. Attorney's OÇce in Alexandria, Virginia
commenced an investigation of Freddie Mac surrounding the restatement. As part of its investigation, the U.S.
Attorney's OÇce requested and received documents and information from Freddie Mac, interviewed certain
Freddie Mac employees and possibly other parties and took testimony before the grand jury. The investigation
is still pending and Freddie Mac will continue to cooperate with the U.S. Attorney's OÇce.
Department of Labor Investigation. In July 2003, the Department of Labor (""DOL'') began an
investigation of Freddie Mac's Thrift/401(k) Savings Plan in relation to the restatement. In connection with the
investigation, the DOL sought and received documents from the company as well as interviewed certain individuals
who served as members of Freddie Mac's Retirement Committee. The investigation is still pending and Freddie
Mac continues to cooperate fully with the DOL.
FEC Investigation. In March 2004, Freddie Mac provided certain information to the Federal Election
Commission (the ""FEC'') concerning compliance with federal election laws. The FEC has been conducting
an investigation into this matter and, in November 2004, subpoenaed documents and responses to interrogato-
ries from Freddie Mac, which Freddie Mac subsequently provided. The FEC has also interviewed certain
present and former Freddie Mac employees. The investigation is still pending and Freddie Mac will continue
to cooperate with the FEC.
Antitrust Lawsuits. Since January 18, 2005, Freddie Mac and Fannie Mae have been named in
multiple lawsuits alleging violations of federal and state antitrust laws and state consumer protection laws. All
of the suits essentially allege that the defendants conspired to establish and maintain artiÑcially high guarantee
fees. One suit contains additional allegations of price Ñxing in connection with other mortgage fees, as well as a
claim of illegally maintaining a monopoly in the market for conforming mortgages and the market for
securitization of conforming mortgages. At present, it is not possible for Freddie Mac to predict the probable
outcome of these lawsuits or any potential impact on Freddie Mac's business, Ñnancial condition or results of
operations.
Other Inquiries. Freddie Mac receives inquires from the IRS in connection with its regular audits of
Freddie Mac's tax returns for prior years, some of which relate to matters connected with the restatement.
Freddie Mac continues to respond to these inquiries. See ""NOTE 14: INCOME TAXES'' for more
information. The Committee on Energy and Commerce of the House of Representatives also sent Freddie
Mac an inquiry relating to the restatement. Freddie Mac has responded to the Committee's inquiry.
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