MANHATTAN (CN) – Despite amassing more than 100 depositions and 4 terabytes of data, regulators gleaned “absolutely no evidence” that ex-Fannie Mae chief Daniel Mudd made any false statements, his lawyer agued in court Wednesday.
The Securities and Exchange Commission brought civil fraud charges in 2011 against Mudd and two lower executives – risk officer Enrico Dallavecchia and former Single Family Mortgages VP Thomas Lund.
With Dallavecchia and Lund having reached five-figure settlements in September, U.S. District Judge Paul Crotty held a hearing Wednesday on Mudd’s motion for summary judgment.
The SEC accuses Mudd of misleading the public with strained euphemisms for subprime mortgages during his tenure heading the Federal National Mortgage Association, better known as Fannie Mae, from June 2005 to September 2008.
Reuters quoted Mudd on Feb. 23, 2007, as having referred to subprime loans as those granted to borrowers with “damaged credit,” and Fannie Mae filed a financial form four days later defining them as loans to people with “weaker credit histories.”
When appearing on National Public Radio’s “The Diane Rehm Show” the next year, Mudd defined the phrase for her listeners as those who “had a credit problem in the past.”
For the commission’s lawyer Richard Hong, these statements amounted to three separate subprime definitions, and they showed Mudd “repeated false and misleading statements when he knew better.”
San Francisco-based attorney John Keker, who represents the executives, called this argument “hogwash” in court today.
Keker said that his client was “speaking to laypeople” when he took to the public airwaves. Furthermore the interview happened a week before Mudd was fired.
Though regulators took 60 investigative depositions, and then 50 more depositions during discovery, they could not find a single Fannie Mae employee, auditor or regulator who deemed these statements misleading, Keker said.
SEC attorney Hong reminded the judge that the regulators did not have to prove their case to bring it before a jury.
The commission “firmly believes there is another side to this story,” Hong said.
Crotty reserved decision at the end of the hearing.
Dallavecchia and Lund’s settlements obligate them to pay $25,000 and $10,000, respectively.
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