Business Consultant: Trust, Oversight Absent from FNMA's Corporate Culture
by Ed Thomas
June 23, 2006
(AgapePress) - - Four-hundred-million dollars in penalties and restrictive administrative reforms were two of the conditions placed on government-sponsored mortgage giant "Fannie Mae" in a settlement last month. That settlement followed a sharply critical report issued by a government oversight agency alleging an unethical corporate culture. The result of a three-year investigation, the report from the Office of Federal Housing Enterprise Oversight (OFHEO) charges that employees of the Federal National Mortgage Association (FNMA) -- commonly referred to as "Fannie Mae" -- manipulated accounting and earnings records to trigger bonuses for senior executives, resulting in nearly $11 billion of overstated income from 1998-2004. It also alleges improper accounting practices and internal controls, and attempts to hinder investigators.
Dr. Gerald Chester is the president of Strategies@Work, a management consulting company which uses a biblical model for helping develop businesses. Chester says if true, such unethical management practices would violate a vital understood truth that is basic to investing.
"Ultimately, if you invest in any organization, whether it's a public company or a private company, you are putting your trust in the management of the entity to be a good fiduciary of your investment. So trust is just huge," he says. "If you don't have trust, there's no basis for investing."
And pointing to a second aspect of the alleged fraud, Chester says the oversight of government bureaucracy is not always effective, hence scandals like Fannie Mae. He notes that both FNMA and its smaller, related mortgage organization -- the Federal Home Loan Mortgage Corporation (a.k.a., "Freddie Mac") -- have had major accounting scandals.
Fannie Mae's two top executives testified before a Senate committee last week that the agency is working on a total overhaul.
Chester is author of the book Beyond Babel -- An Understanding of the Timeless Universal Principles Required to Build Excellent Organizations.
Ed Thomas, a regular contributor to AgapePress, is a reporter for American Family Radio News, which can be heard online.
