The Corner

Obama’s Veep Search Committee

Andy — You think Eric Holder is an interesting choice for the Obama veep search. But just take a look at Jim Johnson, the former Fannie Mae chief Obama has also chosen for the job. More specifically, look at the Office of Federal Housing Enterprise Oversight’s May 2006 report on mismanagement and corruption inside Fannie Mae, and you’ll see some interesting things about Johnson. Investigators found that Fannie Mae had hidden a substantial amount of Johnson’s 1998 compensation from the public, reporting that it was between $6 million and $7 million when it fact it was $21 million. From the report:

[Fannie Mae] failed to disclose to OFHEO in a timely manner a post-employment agreement with former CEO James Johnson that provided him with substantial compensation in addition to that already provided upon his termination as a Fannie Mae employee….

Shortly after the release of the September 2004 OFHEO report, an article in the December 23, 2004, Washington Post entitled “High Pay at Fannie Mae for the Well-Connected,” suggested that 1998 compensation for former Fannie Mae CEO James Johnson “was [reported to be] $6 million to $7 million a year,” in 1998. The total compensation in 1998 for Mr. Johnson was, in fact, substantially more.

An initial review of the 1999 Fannie Mae Proxy Statement “Summary Compensation Table” suggests the source of the Washington Post figure on 1998 compensation for Mr. Johnson. A close read of that proxy, including footnotes, shows that the Table itself listed only a small portion of the actual 1998 long-term compensation of Mr. Johnson. Mr. Johnson used a program available to only very senior Fannie Mae executives (Executive Vice President and above) to defer a sizable amount of earned Performance Share Plan shares. Fannie Mae disclosed in a footnote to the Summary Compensation table that Mr. Johnson deferred 111,623 shares; the actual value of the shares did not show up in the Summary Compensation Table.

Fannie Mae talking points for that period anticipated possible questions about hiding the compensation of Mr. Johnson. The talking points included several questions and answers: (bolded emphasis in original):

Gimme a break. He’s hiding his compensation. To the contrary, its all quite clearly accounted for in the proxy. What he is doing is deferring compensation.

Why is he doing that? It is not appropriate for me to discuss Mr. Johnson’s financial planning.

He’s trying to hide how much he’s made, isn’t he? Again, we’ve disclosed all cash compensation and stock-based awards over the past three years. It couldn’t be more transparent.

The way you disclose it isn’t the easiest thing to follow. We account for all options ever granted to Mr. Johnson and to our other senior executives. We account for all options they each continue to hold and those they have exercised. There’s really no problem following it at all.

An internal Fannie Mae Gross Wage Analysis for Mr. Johnson for 1998 provided a clearer estimate of the actual 1998 compensation of Mr. Johnson. It showed total wages and other earnings to Mr. Johnson of nearly $21 million…

Now, this might seem the sort of inside-Washington dealing that Obama would say he wants to change. If so, Obama will have Johnson himself there to help.


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