“The buck stops below the top.”

That might be the lesson chief executive officers learn from the stories of corporate corruption at Homestore and Freddie Mac.

The online real estate marketing company that operates the Realtor.com Web site for the National Association of Realtors and the giant mortgage finance corporation might not appear to have much in common. But their stories are markedly similar. Both admitted they manipulated their financial results to improve profitability and gain undeserved renown on Wall Street.

“The buck stops below the top.”

That might be the lesson chief executive officers learn from the stories of corporate corruption at Homestore and Freddie Mac.

The online real estate marketing company that operates the Realtor.com Web site for the National Association of Realtors and the giant mortgage finance corporation might not appear to have much in common. But their stories are markedly similar. Both admitted they manipulated their financial results to improve profitability and gain undeserved renown on Wall Street. And at both, underlings have taken the fall while the top executives have walked away unscathed and millions of dollars richer.

The Securities and Exchange Commission and U.S. Department of Justice vowed to teach Corporate America a lesson about cooking the books when these cases came to light. But if senior executives take their tips from what’s happened so far at Homestore and Freddie Mac, the lesson might be that there is safety at the peak of the organization chart.

The SEC has charged 14 people who were involved in Homestore’s fraudulent round-trip transaction scheme in 2001, and nine of those people also have faced criminal charges. Financial penalties have been assessed, and some of the guilty face incarceration. Charges brought by the SEC have included violating or aiding and abetting violations of federal securities laws, including antifraud, record-keeping, internal controls and lying to auditors provisions of federal law.

A former VP of Homestore’s strategic alliances group and a former salesperson earlier this month agreed to plead guilty to criminal charges and settle with the SEC. A former director of contracts also agreed to settle SEC charges.

Two senior executives have been caught in the net. Homestore’s former COO John Giesecke and former CFO Joseph Shew were among those who have settled SEC actions and pleaded guilty to criminal charges.

Yet Stuart Wolff, Homestore’s former CEO, who profited handsomely from the artificial inflation of the company’s stock price, hasn’t been accused of any wrongdoing. (Homestore, under new management for the past several years, has cleaned up its act and cooperated with federal investigators.)

Freddie Mac manipulated its earnings to the tune of billions of dollars cumulatively in 2000, 2001 and 2002. Overstatements and, bizarrely enough, understatements of quarterly earnings were intended to “smooth” the corporation’s results so its bottom line would appear less volatile to investors. The manipulation came to light after an audit that reportedly cost Freddie Mac $100 million. A federal regulator said the corporation disregarded accounting rules, internal controls, disclosure standards and the public trust in the pursuit of steady earnings growth.

Several Freddie Mac employees resigned their positions when the accounting problems were disclosed, and one senior executive was fired for cause. But Leland Brendsel, Freddie Mac’s former chairman and CEO, hasn’t been accused of any involvement in the scam, and federal regulators haven’t been able to block his bid to collect nearly $55 million in compensation for his services to the corporation. Appeals of a recent court decision in his favor are still pending.

The same federal regulators last week pointed to the possibility of similar problems at Fannie Mae, the nation’s second-largest financial corporation. A 210-page report suggested that financial results may have been manipulated to inflate executive bonuses, among other allegations.

Bystanders might brush off a little earnings manipulation as a time-honored tradition of so-called “creative” accounting. But billions of dollars are not pocket change, and cooked books aren’t a victimless crime. Investors are injured when executives cheat, and such crimes call into question the soundness of the nation’s financial markets. That hurts the U.S. economy, and we all pay the price when global investors don’t trust our public corporations.

The indictment of Enron’s former CEO Kenneth Lay this summer was an applause-worthy development in the federal government’s crackdown on corporate crime. But Lay has pleaded not guilty, and whether prosecutors can make the charges against him stick has yet to be seen.

It’s possible that neither Wolff nor Brendsel really knew what was going on in their corporate accounting departments. But perhaps what they knew and when they knew it doesn’t really matter. If they knew the financial results were faulty, they turned a blind eye while they lined their own pockets. If they didn’t know, they should have known because after all, they were paid enormous sums of money to run these corporations. Shouldn’t somebody hold these CEOs responsible for what happened on their watches?

Marcie Geffner is a real estate reporter in Los Angeles.

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