Fannie Mae will pay $2.6 million to settle a pay dispute with former chief executive officer Franklin Raines, the government-sponsored mortgage repurchaser announced in a Securities and Exchange Commission filing.

From 1998 to 2003, federal regulators said Raines was paid more than $90 million, including $52 million in bonuses tied to earnings that have since been restated. He received a $19 million severance package when he took early retirement in December 2004 in the wake of an accounting and management scandal.

Raines said he was owed more under his employment contract, and an outside arbitrator was used to arrive at the $2.6 million settlement.

Raines and Timothy Howard, Fannie Mae’s former chief financial officer, could face a civil lawsuit by the Office of Federal Housing Enterprise Oversight (OFHEO) to recover some bonuses that were tied to earnings.

From 1998 to 2004, OFHEO estimates Fannie Mae overstated reported income and capital by $10.6 billion. The company agreed to pay $400 million in fines as part of settlements with OFHEO and the Securities and Exchange Commission.

OFHEO also fined Fannie Mae’s sister company, Freddie Mac, $125 million after a 2003 investigation led to a $5 billion restatement of earnings.

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