Mortgage finance giant Fannie Mae said Tuesday that it will not file a second-quarter earnings report while it continues to clean up its financial books in the wake of an accounting scandal that came to light last year.

The company hasn’t filed a quarterly earnings report in one year.

Regulators in 2004 uncovered accounting violations at Fannie Mae, setting off investigations by the Securities and Exchange Commission and the U.S. Justice Department and several shareholder lawsuits. As a result, the company will have to restate earnings by as much as $12 billion.

Fannie Mae CEO Daniel Mudd said the restatement likely won’t be complete until the second half of 2006.

“We are leaving no stone unturned. To accomplish this, we have to obtain and validate market values for a large volume of transactions including all of our derivatives, commitments and securities at multiple points in time over the restatement period,” Mudd said.

Fannie Mae expects that more than 30 percent of its employees will spend more than half their time on the restatement, and the company is bringing some 1,500 consultants on board by year’s end to help, Mudd said in an overview of the restatement process.

Altogether, the mortgage giant projects devoting 6 to 8 million labor hours to the restatement, Mudd said. And the company is investing more than $100 million in technology projects to enhance or create new systems related to accounting and reporting.  

Fannie Mae shares fell more than 3 percent today on fears that the financial restatement process could take too long, cost too much money and lead to a delisting by the New York Stock Exchange, according to a Reuters report. In a call with investors today, Fannie Mae said failure to file timely earnings reports could lead the New York Stock Exchange to delist its stock.

Fannie Mae and sister company Freddie Mac have each come under fire for accounting problems. Legislation is in the works to tighten regulation of the housing government-sponsored entities.

A Senate bill passed in July would curb assets that the Fannie Mae and Freddie Mac hold and create a new regulator for the companies. The Office of Federal Housing Enterprise Oversight, or OFHEO, currently oversees the corporations.

Fannie Mae has been shrinking its portfolio to bolster its capital cushion and meet regulatory requirements as it struggles to resolve accounting problems uncovered by OFHEO last year.


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