Ahead of the Bell: Freddie Mac

NEW YORK --Government-sponsored mortgage lender Freddie Mac, which is still recovering from a financial scandal and is facing possibly heightened regulatory oversight, on Friday asks investors to vote for its suggested board of directors slate.

The company, the nation's second-largest buyer and guarantor of home mortgages, is emerging from a 2003 financial scandal. Freddie Mac disclosed that year that it had misstated earnings by at least $5 billion for 2000 through 2002. The agency paid a then-record $125 million fine in a civil settlement with regulators.

In November 2005, Freddie Mac said its earnings for the first half of 2005 were about $220 million lower than originally reported due to computer errors.

Proxy advisory firm Glass Lewis & Co. said investors should withhold votes from board members who were on the audit committee at the times both accounting problems occurred. These are nominees Shaun O'Malley, Stephen Ross, Karl Goeltz and Thomas Johnson.

In addition, Glass Lewis said nominees Geoffrey Boisi and Michelle Engler should not be voted for because both served on the compensation committee in fiscal 2006, when the company paid more compensation to top executives but performed worse than peers.

Another advisory firm, Institutional Shareholder Services, or ISS, recommends investors vote for all 13 director nominees.

The U.S. House of Representatives on May 22 passed legislation designed to tighten federal oversight of both Freddie Mac and Fannie Mae. The two government-sponsored companies together finance or guarantee more than three-quarters of U.S. home mortgages.

"Any government action enhancing federal regulation or limiting the mortgage holdings of the company will likely impact shareholders," Glass Lewis noted in a report.

Shares closed at $65.41 Thursday.