The crisis at Freddie Mac deepened yesterday when the US mortgage lender confirmed it was the subject of formal investigation by the Securities and Exchange Commission (SEC).
Federal prosecutors also revealed they had begun a criminal inquiry.
News of the investigations further rattled investors worried about the management reshuffle that led to the sacking of Mr David Glenn, chief operating officer, and the departure of the chief executive and finance director.
Freddie Mac's stock fell 2 per cent to $50.47 while the spreads on its bonds widened, although traders said plans by the firm to buy back up to $10 billion (€8.5 billion) of its debt securities this week helped reassure the bond market.
A formal investigation allows the SEC to subpoena witnesses and documents from third parties. The inquiry will examine if individuals destroyed or altered documents, and look into the reasons behind the company's accounting restatement.
Freddie Mac has said that actions by Mr Glenn before his dismissal, including altering personal diaries, were not related to accounting records. Investors were shocked by the firm's disclosure on Monday that Mr Glenn had admitted removing pages from a diary.
Freddie Mac said the SEC started an informal inquiry in January, when the lender announced it would restate results for 2000, 2001 and 2002. a (Financial Times Service)
