A federal judge this week ruled that the federal agency that oversees Freddie Mac cannot freeze almost $55 million in pay owed to the company’s former CEO, according to news reports.

The Office of Federal Housing Enterprise Oversight last year ordered Freddie Mac to withhold pay benefits to Leland Brendsel and other executives after accounting problems at the mortgage giant came to light last year. But U.S. District Judge Richard Leon ruled late Monday that OFHEO had exceeded its authority in ordering Freddie Mac to withhold that compensation while it seeks civil penalties and restitution.

“OFHEO’s arguments that it has the power to freeze assets pending the outcome of the administrative proceeding in this case is simply overreaching,” Leon wrote.

Brendsel resigned in June 2003 at the request of Freddie Mac’s board. His resignation was considered to be for “good reason,” which meant he was owed the entire termination package outlined in his employment contract.

But OFHEO tried to retroactively classify his termination as for “cause,” which would have reduced his final compensation.

The judge also said OFHEO cannot claim its authority to freeze that pay is implicit because other regulators have that power over their regulated entities.

“It is inconceivable to this Court that Congress intended to give the same authority to the OFHEO, implicitly, without those or some other procedural safeguards,” Leon wrote.

OFHEO and Freddie Mac officials did not immediately comment on the ruling, instead saying they first needed to review it, according to news reports.

OFHEO fined Freddie Mac $125 million last year over the accounting shenanigans. The regulator said the company disregarded accounting rules, internal controls, disclosure standards and the public trust in the pursuit of steady earnings growth.

In December, the company announced it had understated its earnings by $5 billion cumulatively in 2000, 2001 and 2002. That came to light after a year-long intensive re-audit that executives said cost the mortgage giant at least $100 million.

Freddie Mac’s stock (NYSE: FRE) was trading at $67.58 this morning.

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