Wednesday, June 11, 2008

MORE REASONS OBAMA SHOULD HAVE VETTED HIS VETTERS

WASH POST As CEO of Fannie Mae, Johnson, a former chief of staff to Vice President Walter F. Mondale and chairman of the board of the Kennedy Center, was the beneficiary of accounting in which Fannie Mae's earnings were manipulated so that executives could earn larger bonuses. The accounting manipulation for 1998 resulted in the maximum payouts to Fannie Mae's senior executives -- $1.9 million in Johnson's case -- when the company's performance that year would have otherwise resulted in no bonuses at all, according to reports in 2004 and 2006 by the Office of Federal Housing Enterprise Oversight.

In a 2006 civil enforcement action against Fannie Mae, another agency, the Securities and Exchange Commission, called the company's 1998 accounting "fraudulent" and said numbers were "intentionally manipulated to trigger management bonuses."

Johnson left the company before it was swept up in an accounting scandal that tarred its reputation, but even during the years of scandal, Johnson was reaping hundreds of thousands of dollars in consulting fees and other compensation, $3.3 million in all between 2001 and 2006.

Brian Brooks, an attorney for Johnson, said last night that the accounting issues at Fannie Mae were thoroughly investigated, and that "no one has ever suggested that Mr. Johnson was responsible for the accounting decisions at issue, nor has he had any involvement with these accounting issues during his tenure as a consultant since leaving employment with the company in 1999."

But Johnson is not the only member of Obama's vice presidential vetting committee that Republicans have targeted.

They also are preparing a case against former deputy attorney general Eric Holder for his role in the granting of a pardon to fugitive financier Marc Rich in the last days of the Clinton White House.

In December 2000, as Rich's lawyers were closing in on the pardon, one of them, Jack Quinn, singled out Holder in an e-mail. "The greatest danger lies with the lawyers," Quinn wrote his co-counsels. "I have worked them hard and I am hopeful that E. Holder will be helpful to us."

Any attacks on Holder will probably not mention that one of Rich's lawyers, I. Lewis "Scooter" Libby, went on to become Vice President Cheney's chief of staff. . .

Johnson who provides the most immediate fodder for attack. His lavish lifestyle, multiple homes, personal staff and chauffeur strike a dissonant chord as Obama excoriates Republican "tax cuts for the rich" and calls McCain, the presumptive Republican nominee, an out-of-touch Washington insider.

Although OFHEO said Johnson benefited from the earnings manipulations, the agency did not accuse him of participating in them, and the SEC did not accuse him of any wrongdoing. He ended his term as chairman and chief executive of the District-based company in December 1998, before Fannie Mae reported its financial results for that year. In 1999, he served as chairman of the company's executive committee.

A federal regulatory agency suggested that even if Johnson's compensation for 1998 were entirely justified, Fannie Mae obscured its magnitude, disclosing pay of $6 million to $7 million a year in 1998. But Johnson was allowed to defer 111,623 shares of Fannie Mae stock, a move that was relegated to a footnote and not included in the company's summary compensation table.

Total compensation that year was closer to $21 million, according to an internal Fannie Mae analysis cited by OFHEO. . .

Among Johnson's post-employment perks were an inflation-adjusted consulting contract of $390,500 that began in 2002, two employees and a chauffeur, and office space at the Watergate, even after he began work at Perseus, an investment firm that gave him his own office. His lawyer described that compensation yesterday as "consistent with what is customarily provided to retiring Fortune 100 CEOs."

Johnson was supposed to reimburse the company for 50 percent of the chauffeur's time, but that did not apply to time spent waiting for Johnson or driving his wife. Consequently, he reimbursed Fannie for about 15 percent of the cost.

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