2. Freddie Mac understated its earnings by $5 billion over more than 3 years. This ended an 11-month review of the company’s accounting which led to the resignations of prominent executives. Freddie Mac understated their earnings in an effort to smooth quarterly volatility in earnings and to meet the expectations of Wall Street. The events shocked Wall Street as Freddie Mac had been seen as having a stellar reputation as a steady performer and reliable corporate player. Freddie Mac had to pay a $50 million fine to settle civil securities fraud charges brought by federal regulators in a four-year accounting lapse. They also paid a record $125 million civil fine in 2003 in a settlement with the Office of Federal housing Enterprise Oversight, which blamed management misconduct for the faulty accounting.