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Freddie Mac is coping with the fallout from a multibillion-dollar accounting scandal that has forced the departure of much of its corporate brass and put the company on the political hot seat. Enter Ralph Boyd Jr., a one-time federal prosecutor and former high-ranking appointee of President George W. Bush, who will begin April 1 as the new chief of the Federal Home Mortgage Corp.’s lobbying and legal department. The 47-year-old Alston & Bird partner knows how to manage controversial situations. He spent two years in the spotlight as chief of the Department of Justice’s Civil Rights Division, and weathered criticism that he weakened civil rights enforcement. That experience, coupled with his ties to the Bush administration, may help him build political bridges for the McLean, Va.-based Freddie Mac. Internally, Boyd replaces a general counsel who held the job for more than 20 years. And, with authority for not only law but government relations, he is taking on a much bigger job at Freddie Mac. “The expectation is that I will certainly be one of the faces of Freddie Mac, both to Congress and to the public,” says Boyd. “I view that as a great challenge and an exciting part of this job.” Boyd inherits a long list of troubles. The company, after conceding that it had lowered company earnings by almost $5 billion from 2000 to 2002 in order to please Wall Street, in December agreed to pay a $125 million civil fine to its regulator, the Office of Federal Housing Enterprise Oversight. It also promised in a consent agreement to improve its internal controls, accounting practices, and disclosures to investors. The company faces ongoing inquiries by the Justice Department and the Securities and Exchange Commission. And in recent months, Freddie Mac — and its counterpart, Fannie Mae (the Federal Home Mortgage Association) — have been criticized by Treasury Secretary John Snow and Federal Reserve Chairman Alan Greenspan, among others. What’s more, Boyd will also have to contend with rising concern in Congress over the way that Freddie Mac and Fannie Mae are regulated. A Senate panel is slated to vote next month on legislation that would follow the Bush administration’s calls to make the Treasury Department, instead of OFHEO, the regulator of the two companies. Chartered by the government to stabilize the residential mortgage market, Freddie Mac and Fannie Mae buy mortgages from lenders and sell them as securities. The two companies are exempt from state and local income taxes and, although publicly traded, are not required to file financial statements with the SEC. In the coming months, however, Boyd will preside over Freddie’s moves to register with the SEC, which the company says signals its commitment to follow the standards that apply to all other public companies. By filing with the commission, Freddie Mac makes itself subject to the same periodic disclosure requirements that apply to all registered companies. Boyd will work alongside Joan Donoghue, who will oversee day-to-day legal matters as principal deputy general counsel, a newly created position. Donoghue, who is now acting general counsel, says that to gear up for SEC reporting, Freddie Mac plans to fill its top securities post as soon as possible and over the last year has beefed up its securities division. In addition, by midsummer Boyd and Donoghue will fill two other vacant vice president positions in the legal department, whose 85 lawyers are organized into divisions covering mortgage law, corporate affairs, securities, and general litigation. “We need to continue to focus on making sure we have all of the resources and talent we need for helping this company move toward exceptional standards in that area,” says Donoghue. Since June, the company has ousted CEO Leland Brendsel and president David Glenn — and, at the demand of federal regulators, asked longtime General Counsel Maud Mater and Brendsel’s successor, Gregory Parseghian, to leave as well. The company’s newest chief executive and a former chairman of the American Stock Exchange, Richard Syron, joined Freddie Mac in December. Most recently, top lobbyist R. Mitchell Delk was asked to resign March 11 after the Federal Election Commission opened an investigation into his fund-raising activities. In the coming months, the company plans to hire another chief lobbyist who will report to Boyd. (Delk reported directly to Freddie Mac’s CEO.) “All of those externally visible events have an impact,” says Donoghue. “Over the last year, I’ve emphasized communication with the legal division during a period when a huge amount was going on that lawyers were at the center of.” To help the company comply with the consent order it signed in December, Freddie Mac has hired Covington & Burling securities partner David Martin to head a team of outside attorneys and advisers. Among other mandates, the order requires Freddie Mac to submit to OFHEO by the end of June a plan to “foster a management culture in which appropriate consideration is given to operational stability and legal and regulatory compliance.” Under Boyd, the structure of Freddie Mac’s in-house law department, headed for more than two decades by Mater, will change as well, as Boyd assumes responsibility for both legal work and lobbying efforts. Given the company’s governance lapses, Boyd says, concerted oversight of both disciplines is necessary. “There needs to be the impression that this is a modification,” he says. Boyd’s appointment could mark a turning point in Freddie Mac’s approach to lobbying, says Richard Carnell, former senior counsel to the Senate Committee on Banking, Housing, and Urban Affairs, who recently testified before the committee on regulation of Freddie Mac. “Given Freddie’s recent troubles it makes sense to have a general counsel who is squeaky clean and can help rebuild credibility on Wall Street and in Washington,” says Carnell, a Fordham University School of Law professor and a former assistant secretary for financial institutions in the Department of the Treasury. “The biggest risk Freddie faces is political — the possibility of losing the generous benefits it receives from the federal government.” Carnell adds that Freddie Mac has historically been less heavy-handed in its lobbying than Fannie Mae. “At Fannie Mae, there are mostly political people at the top, people who they figured could be heavy hitters,” Carnell says. One example is Fannie Mae Chairman Franklin Raines, who served as director of the Office of Management and Budget under then-President Bill Clinton. Carnell says Boyd “has a reputation to lose” should he be unable to help solve Freddie’s political and legal challenges. And, in addition to his political experience, Boyd says that since leaving the Justice Department last July, he has added a list of corporate engagements to his r�sum� as well. He calls his recent work advising corporations in trouble an “intense” experience — if not a crash course in the world of corporate governance post-Sarbanes-Oxley. Among his clients are Friedman’s Inc., a Savannah, Ga.-based jewelry chain under investigation by DOJ and the SEC. Boyd says he has not met with DOJ prosecutors in the case because of rules that govern former federal officials. Since leaving government, Boyd joined the board of directors of the Hughes Electronics Corp., a post he says he plans to keep. “I haven’t seen the entire universe of issues that could arise that someone on general counsel needs to be on lookout for,” says Boyd. “But I’ve seen enough to know what to start to look for.” Boyd says that he plans to retain fellow Alston & Bird partner Robert Driscoll to help him chart the future of Freddie’s legal division and government relations work. He adds that he hasn’t made other decisions about outside counsel. Given the recent history of Freddie Mac’s legal and lobbying operations, Boyd has reason to be cautious. In a December report on Freddie Mac, OFHEO sharply criticized Mater’s management of the legal department and detailed its role in the company’s accounting missteps. The report faults Mater, along with other executives, for encouraging “minimal” disclosure to regulators and investors. But one former Freddie Mac lawyer who left the mortgage company in June says Mater’s dismissal was a surprise. “She built a healthy institution in the legal department. It was not a dysfunctional place — sometimes eccentric, but never dysfunctional,” says Donald Brewster, who left Freddie Mac to become general counsel of KB Home Mortgage in Los Angeles. He adds that, in practice, Mater did encourage sound disclosure policies. Attempts to reach Mater for comment were unsuccessful. Boyd was criticized by some for his management style while running the 375-lawyer Civil Rights Division. Critics point to a retreat from employment discrimination suits and Boyd’s move to raise the bar for authorization of new cases in several areas, such as police misconduct. While an Assistant U.S. Attorney in Boston, Boyd prosecuted several high-profile cases involving gang violence, in addition to bank fraud, firearms offenses, homicides, narcotics trafficking, and bank robbery cases. Donald Stern, the former U.S. Attorney of Massachusetts who oversaw Boyd, says that he spearheaded efforts against inner-city violence in Boston. Stern says Boyd not only prosecuted gang leaders, but attended community meetings to talk with residents about combating crime in their neighborhoods. “He was creative, articulate, and charismatic — someone that people related to very well,” says Stern, who is now a partner at Bingham McCutchen in Boston. “He has all of the qualities of a good, effective prosecutor in the courtroom and an effective person in the community.” Driscoll, who was Boyd’s deputy at Justice, has a different take on Boyd’s work in the Civil Rights Division, calling him generous with credit and quick to inspire loyalty. He says that deflecting shots volleyed at Freddie is just the job for his former boss. “He is a very engaging advocate,” says Driscoll, who also practiced with Boyd at Goodwin Procter in Boston prior to their moves to Washington. “His ability to lead translates across industries or issues. The bottom line with Ralph is that he has the highest emotional intelligence of anyone I’ve worked with.”

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