Tuesday June 6, 2006 | Let me see if I have this straight. The elected crooks running San Diego hire the crooks to investigate the elected crooks while the biggest crooks of all time wait for the report on the elected crooks before they audit the books from 2003. Amazing but sad isn’t it?

Some of you might not be aware of the biggest corporate scandal of all time since it has hardly been reported in the news media. I am referring to the $10 billion accounting scandal at Fannie Mae. Who were their external auditors that didn’t catch the $10 billion mistake?

From the Report of the Special Examination of Fannie Mae

“Despite KPMG’s testimony that it was not aware of the policy, OFHEO found copies of the policy included in KPMG’s 2003 audit work papers related to the allegations of fraud made by Roger Barnes which are discussed in detail later in this chapter.”

“Another limitation of KPMG’s review of Mr. Barnes’ allegations was that none of the KPMG personnel who reviewed those allegations fully understood FAS 91.”

“Fannie Mae opposed Freddie Mac’s retention of KPMG to replace Arthur Andersen, in the wake of the Enron scandal, in part because Freddie Mac properly accounted for its buy-ups and KPMG would notice. Referring to buy-ups here as “IOs,” Ms. Spencer wrote, “We believe it is a good thing for the ‘industry of two’ to have different auditors. It gives us a vehicle to get a second opinion at times. . . .There is at least one thing that we know of where we have a favorable accounting treatment and that is on the IOs we have on our books. Freddie is doing IO accounting and we are not. KPMG hasn’t figured that out – but Jonathan reminded me of this.”

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