BusinessCompany NewsFresh accounting scandals rock US

Fresh accounting scandals rock US

Despite the implementation of the tough Sarbanes-Oxley Act and the fallout from Enron, the United States business world continues to be rocked by accounting scandals.

Link: Sarbanes-Oxley Act special

Yesterday three US certified public accountants were charged with criminal and civil fraud following claims they artificially inflated the earnings of energy group Dynegy.

Jamie Olis, Gene Foster and Helen Sharkey face charges of securities, mail and wire fraud charges. Federal prosecutors accused them of misleading auditors, PricewaterhouseCoopers, and investors.

And in the property market, US mortgage giant Freddie Mac admitted yesterday two former directors were paid more than $40m (£24m) after they were forced to leave the company.

The company’s former chief executive Leland Brendsel and its previous president and chief operating officer David Glenn were both fired because of their connections to an ongoing accounting inquiry.

Freddie Mac, which buy mortgage loans from lenders and packages them as securities for investors, is set to make an accounting restatement which could run into the billions of dollars.

The restatement, delayed until the third quarter, deals with how the company accounts for billions of dollars in derivatives, complex financial instruments it uses to manage its interest rate risk.

Given its enormous size – Freddie’s debt to bondholders exceeds $500bn – the scandal is set to shake the US economy.

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