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AGENCY BLASTS FREDDIE MAC’S IN-HOUSE TEAM OVER DISCLOSURE Freddie Mac’s in-house lawyers had “dramatic amounts of responsibility for disclosure” at the company, according to a highly critical report released last week by the mortgage giant’s federal regulator. Issued Dec. 10 by the Office of Federal Housing Enterprise Oversight (OFHEO), the report faults former General Counsel Maud Mater, along with other executives, for encouraging “minimal” disclosure to regulators and investors. “The Legal Department appears to have applied a ‘less is more’ philosophy when formulating legal opinions regarding the disclosure of specific transactions,” the report says. “The special examination revealed that both CEO Leland Brendsel and General Counsel Maud Mater played significant roles in reviewing and revising the public disclosures of Freddie Mac, although both parties denied playing a significant role in producing them.” The report delves deeper into the legal department’s role in the company’s accounting missteps than did an internal probe for Freddie’s board by Baker Botts released in July. Freddie Mac understated net income by nearly $5 billion from 2000 to 2002 in an effort to smooth earnings. Last week, it agreed to pay a $125 million civil fine to OFHEO and to improve internal controls, accounting practices, and disclosures to investors. Inquiries into Freddie Mac by the Securities and Exchange Commission and the Justice Department are ongoing. Freddie Mac spokeswoman Sharon McHale says the company strongly disagrees with many of OFHEO’s findings, but declines to comment on specifics. OFHEO’s report relays separate accounts from Mater and others � including Senior Vice President of Market Risk Oversight Robert Dean and CEO Gregory Parseghian � about who had responsibility for disclosures. The three were ousted by an OFHEO directive earlier this year. Parseghian asserted that Mater told the company’s securities counsel to apply a policy of minimal disclosure in reports. Dean stressed that the final say on whether disclosures met SEC requirements was the province of the legal department. Mater reported to OFHEO that the procedures for quarterly and annual financial reporting were “owned and run by the Chief Financial Officer and the Controller,” although the duties were not a “front and center job description item” for the CFO. The report calls “lacking in credibility” Mater’s claim that she doesn’t recall addressing SEC concerns about certain earnings management methods used by Freddie. Mater is represented by John Douglas, say lawyers familiar with Freddie Mac. Douglas, chair of the financial services group at Atlanta’s Alston & Bird, declined comment. � Lily Henning CHANGES AT THE PTO The U.S. Patent and Trademark Office will need a new director come Jan. 9 with the departure of James Rogan after a two-year stint. The buzz in the patent bar is that deputy director Jon Dudas, who will be acting director, is the front-runner to take over the presidentially appointed position. Rogan put “PTO reform on the Washington legislative agenda,” says Herbert Wamsley, the Intellectual Property Owners Association’s executive director. Rogan launched a five-year plan to improve patent quality. A bill to increase filing fees and end “fee diversion” � an effort to keep PTO-generated funds at the PTO � has not been passed. “I’ve done everything I can on it,” Rogan says. Rogan is returning to California to finish an autobiography, due out next summer. Other than that, “I’ll probably go hang my hat at a law firm.” Meanwhile, the PTO wants lawyers and patent agents to take continuing legal education courses and pay annual dues. Currently, the agency requires a one-time test for admission. The proposed rules call for practitioners to answer questions on the PTO’s Web site or take approved CLE courses every one to three years. � Christine Hines EXCELLENT CHOICE The Council for Court Excellence, a nonprofit that monitors D.C.’s courts, has named Justice Department policy official June Kress executive director. Kress, 54, replaces Jeanne Milliken Bonds, who quit earlier this year. Over the past year, Kress, a longtime D.C. resident, has been working with the D.C. Council’s judiciary committee on issues involving the city’s justice system. “I am committed to improving the administration of justice in the District,” says Kress, who joined DOJ in 1995 as part of its community policing program. “This just seems like the logical next step for me.” The council has been scrambling to find a new executive director and repair its image after it became known that Bonds had been mayor of a North Carolina town while running the D.C. group. � Tom Schoenberg NO ‘CIVIL GIDEON‘ � FOR NOW Maryland’s highest court has narrowly rejected an effort by public interest advocates to establish a right to counsel for indigents in civil cases. On Dec. 11, the court ruled unanimously in favor of Deborah Frase, a single mother locked in a child custody battle � but four of the seven justices declined to address Frase’s novel argument that under the Maryland Constitution the state should have furnished her with a lawyer. Frase had pursued her case on her own and lost some aspects of it at trial. The four-member majority of the Maryland Court of Appeals took a pass on the right-to-counsel issue. But in a concurring opinion, three judges wrote that it is “wrong to avoid the issue” and that in cases involving parental rights, “counsel should be provided for those parents who lack independent means to retain private counsel.” Jonathan Smith, who touched off the Maryland effort to establish a “civil Gideon,” calls the decision “ a huge victory for access to justice,” even though his side did not command a majority. “Three judges out of seven have said you can’t get justice without the presence of a lawyer,” Smith says. � Jonathan Groner TAX RETURN It’s not always a bad thing when the tax collectors come knocking. At least not for Shaw Pittman, which just finished counseling Inland Revenue � the U.K. equivalent of the Internal Revenue Service � on a $6.8 billion contract that includes operation of a tax-payment-processing system. It’s one of the largest and most complex government technology projects the U.K. has ever undertaken, according to Shaw Pittman London lawyer Alistair Maughan. The firm advised Inland Revenue on a two-year procurement process that resulted in bid awards to Paris-based Cap Gemini Ernst & Young and Japan’s Fujitsu Services, which replace U.S. firms, EDS Corp. and Accenture. � Lily Henning LABOR’S LAWYER Wiley Rein & Fielding alum Howard Radzely was confirmed as solicitor of labor on Dec. 10. The former clerk to Supreme Court Justice Antonin Scalia has been acting solicitor since January, when Scalia’s son, Eugene Scalia, returned to a partnership at Gibson, Dunn & Crutcher. Scalia, who was never confirmed, spent a year in the post. Radzely was first named deputy solicitor in 2001. As solicitor, Radzely is the chief legal officer of the Department of Labor and the head of one of the largest legal departments in the city, with about 500 lawyers on his staff. Radzely’s office enforces the nation’s labor laws, oversees department litigation, and advises Secretary of Labor Elaine Chao. � Marie Beaudette GOING HOME Williams & Connolly welcomes back David Aufhauser after his nearly three-year stint as the Treasury Department’s top lawyer. While at Treasury, Aufhauser made thwarting terrorist financing a priority, serving as chairman of the National Security Council’s committee on terrorist financing. At Williams & Connolly he will focus on finance, securities, tax, and trade. “I can’t imagine a richer, more rewarding time to serve the country,” he says. Responding to a General Accounting Office report released Dec. 12 that says the Treasury and Justice departments have fallen behind in tackling terrorist money laundering, Aufhauser says it is only half right. “It should reflect that we started at ground zero on terrorist financing issues and made material and real advances,” he says. “These are vexing, challenging issues.” � Lily Henning BORDER WAR Virginia won the right to draw water from the Potomac River without first seeking permission from Maryland in a 7-2 Supreme Court ruling Dec. 9. Maryland owns the riverbed and claimed it could regulate Virginia’s use of the water, but the Court disagreed. The two justices who sided with Maryland were Anthony Kennedy and John Paul Stevens, both residents of Virginia. The Court’s only Maryland resident, Sandra Day O’Connor, sided with Virginia. “You can’t attribute the outcome to local loyalties,” laughs Hunton & Williams McLean, Va., partner Stuart Raphael, who argued and won the case for Virginia. � Tony Mauro SAD SILENCE For the past 43 years, anyone calling the Supreme Court would, more than likely, first hear the firm voice of Edith Parks. Parks, the Court’s main switchboard operator, died Dec. 4 at the age of 85, suffering a heart attack on her way to work. Parks “will be greatly missed by everyone at the Court and by the public whom she so ably assisted,” said Chief Justice William Rehnquist in a statement marking her death. In a 1985 interview Parks recalled her work at the Court, which brought her in frequent phone contact with the justices. When a justice picked up a phone, a red light showed on her switchboard. “We jumped at those lights first,” she said. Tracking down Justice William O. Douglas in his phone-free summer retreat in Goose Prairie, Wash., was a special challenge, she said. “We used to send the forest rangers 60 miles up in to the wilds to bring Justice Douglas down.” Once, long after the death of Justice Hugo Black, an inebriated member of the public called the Court demanding to speak to Black to protest a high court decision on busing. “Well, you’d better call St. Peter,” Parks replied. A few minutes later the man called back to say he had talked to St. Peter but still could not get through to the justice, explaining, “They said they were going to bus him until they decide where to put him.” � Tony Mauro COMEY CONFIRMED It’s official. James Comey Jr., former U.S. attorney for the Southern District of New York, was confirmed Dec. 9 to fill the Justice Department’s No. 2 post. Comey is a veteran prosecutor who has played a key role in DOJ counterterrorism and corporate fraud initiatives. Among the responsibilities of the deputy AG: oversight of the department’s day-to-day operations and coordination of the 94 U.S. attorney’s offices. Despite having broad bipartisan support, Comey’s nomination was held up last month by Sen. Charles Grassley (R-Iowa), who wanted assurances from the Justice Department that DOJ employees would not suffer reprisals for testifying before the Senate Finance Committee, which he chairs. � Vanessa Blum

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