Freddie Mac CEO says nothing to hide on stock sales

Freddie Mac Chief Executive Officer Greg Parseghian said he had "nothing to hide" with regard to his past sales of stock in the No. 2 US mortgage finance company.

Mr Parseghian, installed as CEO of the McLean, Virginia-based company in June, was responding to allegations in a shareholder lawsuit filed last week by class-action specialist Milberg Weiss Bershad Hynes & Lerach LLP, a Freddie Mac spokeswoman said.

In a press statement, Mr Parseghian said he has sold Freddie Mac stock three times since being hired in 1996, and remains "heavily invested" in the company.

"I have nothing to hide," he said. "Each of my trades in Freddie Mac stock has been in full compliance with the law and I am confident that any legal proceeding will reach the same conclusion."

Freddie Mac shook financial markets in June when it replaced its top three executives because of problems unearthed in an accounting probe. It fired President David Glenn, while Chairman and CEO Leland Brendsel retired and Chief Financial Officer Vaughn Clarke resigned. All three are defendants in the shareholder lawsuit in New York federal court.

"When this lawsuit was filed, many people did not realise that Greg was named as a defendant," Freddie Mac spokeswoman Sharon McHale said. "We have been getting a number of questions from investors, especially today, and Greg feels personally outraged. He wanted to be on the record very clearly."

As chief investment officer, Mr Parseghian had been involved in many of Freddie Mac's questionable activities, according to a report prepared by James Doty, former US Securities and Exchange Commission general counsel, and a partner in the law firm Baker Botts.

The report said executives massaged earnings to create an aura of a "steady Freddie" that could generate consistent, predictable financial results.

Investors have said the report, released in July, cast doubt on the future of Mr Parseghian and Freddie Mac's near-term stability. Freddie Mac has said it will restate profit upward by between $1.5 billion and $4.5 billion.

Shaun O'Malley, installed as Freddie Mac's chairman in June, on Friday maintained his support for Mr Parseghian.

"Based upon all of the facts I've seen and reviewed with our counsel, I believe the allegations about Mr Parseghian are utterly without merit," he said in a statement released to Reuters. "It remains clear to me that Greg Parseghian is the right choice to be chief executive officer."

O'Malley said Freddie Mac reviewed Parseghian's fitness for the CEO position with Baker Botts before appointing him.

Asked whether Parseghian's job might be in jeopardy, McHale said O'Malley's statement "should put that concern to rest."

Freddie Mac shares closed Friday on the New York Stock Exchange at $50.67, down eight cents. The stock's price has fallen 15 per cent since the company changed top management.