Colleagues Puzzled By Picture Of Ex-Freddie Mac Exec
By Mark Wigfield
06/19/2003
Dow Jones News Service
WASHINGTON -(Dow Jones)- Former Freddie Mac (FRE) President and Chief Operating Officer David Glenn faced a tough
choice some 25 years ago as he attempted to meet publish-or-perish expectations as professor at the University
of Utah's David Eccles School of Business.
Glenn, who was fired June 9 for failing to cooperate with the board surrounding an earnings restatement at the giant government-sponsored mortgage finance company, had co-written an academic paper on an arcane issue of capital costs in not-for-profit hospitals. Included in the paper was key criticism of another article on the same topic that had been published in the same academic journal - criticism that an editor insisted be removed from Glenn's article.
"He wouldn't do it," said Calvin Boardman, a professor of finance at the university who co-wrote the paper with Glenn. "For us, it was a matter of integrity. So the paper died on the vine."
Stories of integrity, competence, conservatism and grace under pressure are repeated over and over by people who know Glenn as he faces what appears to be the first major crisis in a long and respected career. And so are expressions of shock that he was fired by Freddie Mac for ripping out or altering pages of notes he had recorded in his diary of recent meetings, notes that the board had hoped to review.
"If you go through the list of people who would have problems, he would be at the bottom of the list," says William Seidman, former chairman of the Federal Deposit Insurance Corp. Seidman recently worked with Glenn to design a voluntary financial disclosure program for Freddie intended to answer critics' calls for more transparency "without getting them into the meshes of the SEC (Securities and Exchange Commission)," he said.
The board is examining why Freddie Mac earlier this year announced it
would restate earnings for 2000, 2001 and 2002 after the company's new accountant, PricewaterhouseCoopers, questioned
Freddie and its previous accountant, Arthur Andersen, about how they handled accounting for certain transactions.
While the restatement is expected to increase earnings, it comes at a time when members of Congress and others
question whether tougher oversight is required of Freddie Mac and Fannie Mae (FNM), the two government-sponsored
entities that fuel the home loan industry by buying vast quantities of mortgages in a secondary market.
Freddie Mac's Explosive Growth Since 1990
Freddie, whose proper name is Federal Home Loan Mortgage Corp., was owned by the Federal Home Loan Bank System
and its member savings and loans until 1989. In the wake of the savings and loan crisis, Congress turned Freddie
into a publicly traded company controlled by an 18-member board of directors, five of whom are appointed by the
president of the U.S.
The change was followed by unprecedented growth that saw Freddie's assets skyrocket from $40 billion in 1990 to $722 billion at the end of 2002, although that number could change in the restatement.
The torrid growth has raised questions about whether Freddie - and Glenn - were equipped to handle the inevitable pressures of answering to shareholders.
"The company was under pressure for earnings in a way that wasn't true before they had a shareholder board," says attorney Thomas Stanton, who has written extensively on government-sponsored enterprises. "Once they had a shareholder board, the direction of the company changed to accept greater risk."
But former Freddie board member Joel I. Ferguson said that during his six-year tenure on the board, neither Glenn nor the corporate culture changed. Ferguson was appointed by President Clinton in 1996.
"Every time we had a meeting, (Glenn) was always laid back," Ferguson says. "Everyone on the board was highly successful in his own right." Glenn "fit right in," Ferguson added.
Ferguson says Glenn was responsible for firing Arthur Andersen, feeling it was in Freddie's best interest as the accounting firm was consumed by the Enron Corp. (ENRNQ) financial scandal.
"In my heart of hearts, I know that after the witch hunt and grandstanding are over by some of the congressmen who have an ax to pick with Freddie anyway, they will find that David Glenn did nothing wrong except not being candid when he should have been," Ferguson said.
Glenn's attorney, Thomas P. Vartanian said Glenn would have no comment.
Some Viewed Glenn As Aloof, Others As Well-Respected
Glenn, 58 years old, joined Freddie Mac in 1987, arriving there after a career that included stints at Federal
Savings and Loan Insurance Corp., and CalFed Inc., one of the nation's largest savings and loans.
While seen by some as an aloof manager, that's not the impression that University of Utah professor Boardman had of his former colleague.
"He was well-respected, well-liked and very articulate," Boardman said. Boardman recommended dean as a candidate for dean of the business school. "I had that much respect for his ability as an administrator, for his intellect as an academic and for his interpersonal skills to manage a faculty. He was a very impressive guy," Boardman said.
That opinion is shared by others who knew Glenn in his early years at Freddie Mac. Lawrence White, now a professor at New York University's Leonard N. Stern School of Business, was a member of the Federal Home Loan Bank board, which oversaw Freddie before it went public.
"He was a very straight-up guy," White says, noting that his friends in senior management at Freddie are puzzled by the doctored diaries.
"I will be very curious when the dust settles about what he did, and why did he do it," White says. "It's so out of character."
One theory is that Glenn was vying for the top job at Freddie, held by Leland Brendsel, who also was forced out in the shakeup, and that his notes contained embarrassing information unrelated to the restatement that could have hurt his chances of winning a promotion.
Freddie officials have said the diaries are "not the books and financial records of Freddie Mac," but have declined to characterize them further.
But if Glenn was hoping to move up, it's unlikely he would have done so out of overriding ambition, says M. Danny Wall, a chairman of the former Federal Home Loan Bank board and chief of staff of the Senate Banking Committee, both of which oversaw Freddie.
"He was very quiet, reserved and humble," says Wall, who is now president of GMAC Commercial Mortgage Bank. "I saw him as the perfect No. 2. He didn't seek the limelight."
Wall said he was stunned by the allegation that Glenn failed to cooperate with the board.
"I don't see him as a person who would be recalcitrant or unresponsive when asked for information by a board committee," Wall said.
Wall hasn't talked to Glenn since the company went public. But the picture of an uncooperative executive "is not the character I know."