By Jonathan Weil
Time for a pop quiz. See if you can spot what's wrong with this sentence from the Securities and Exchange Commission's lawsuit last week against former Fannie Mae chief executive officer Daniel Mudd:
"Additionally, during the relevant period Mudd was a member of the board of directors, the audit committee, a regular attendee at the board's risk policy and capital committee meetings, held regular weekly meetings with his direct reports the business units, and attended quarterly business unit briefings."
Give up? Here's a hint. The SEC made the same mistake again later on in this sentence of the complaint:
"Also, as a member of the audit committee at Fannie Mae and the board of directors, Mudd participated in final committee and board reviews of Fannie Mae's Forms 10-K and Forms 10-Q during the relevant period prior to certifying."
If you answered that it was an error to say Mudd was on Fannie's audit committee, give yourself a gold star. Mudd not only wasn't a member, he couldn't have been one, under SEC rules and New York Stock Exchange listing standards. That's because, as Fannie's proxy statement made clear, he wasn't an independent director. Rather, as CEO, Mudd was part of Fannie's management, which the audit committee was responsible for overseeing.
An SEC spokesman, John Nester, confirmed that the statements were in error. He declined further comment.
(Jonathan Weil is a Bloomberg View columnist. Read his previous coverage of the SEC lawsuit here.)-0- Dec/23/2011 16:21 GMT