A Freddie Mac news release said the settlement agreement did not include an admission of wrongdoing. The lawsuit alleged the mortgage finance company had violated ERISA because administrators of its Thrift/401(k) savings plan failed to give complete and accurate information to participants in the program and failed to manage the fund properly, according to the Associated Press.
“Today’s proposed settlement further demonstrates our commitment to resolving past issues so that we can maintain our focus on achieving our mission, serving our customers and running our business well,” said Richard Syron, Freddie Mac’s chairman and chief executive officer, in the company statement posted to its Web site. The statement said the damage payment will be fully covered by liability insurance.
Freddie Mac came under intense scrutiny several years ago for its practices of managing its books to keep period-to-period earnings steady. These financial actions resulted in a restatement of the company’s earnings that added up to $4.5 billion to profits (See Freddie Mac Retirement Plan Comes Under IRS Scrutiny).
It was also revealed that the company’s financing relating to the retirement plan was being studied by by both the Internal Revenue Service (IRS) and the US Department of Labor (DoL). Freddie Mac was hit with a string of pension fund lawsuits (See Freddie Mac Under Pension Fund Lawsuit Fire ).
However, in its latest statement, Freddie Mac said that DoL had told it that it has closed its investigation of Freddie Mac’s Thrift/401(k) Savings Plan. The DoL has indicated that it will consider whether further action is warranted if the settlement is not finalized, approved, and implemented as proposed.
Also as part of the deal, Freddie Mac said it has agreed to retain an independent fiduciary to review and approve the settlement and plan for the allocation of settlement proceeds. In addition, the company has agreed to conduct voluntary seminars to educate employees about investing and the importance of asset diversification, and to amend the Thrift/401(k) Savings Plan to appoint an independent fiduciary to oversee the Freddie Mac Stock Fund, one of the investment options under the plan. The company has also agreed to provide additional education to employees.