Earnings management fraud 1998-2002; $50M settlement; 30-42% net income misstatement
Federal Home Loan Mortgage Corporation · mortgage finance
The case in brief
Visible before detection
Checks that could have surfaced it, on hindsight
Bank credits vs books
Derivative transactions and their economic impact would not reconcile with reported earnings
Can mislead when: AA only sees the accounts the company links, so an undisclosed account stays invisible. Cash-heavy businesses and timing differences create false flags.
Books edit log
Manual journal entries and adjustments to earnings accounts would reveal the smoothing practices
Can mislead when: Logs can be disabled at database level (auditors qualified this in year one) or tampered with on export. Kubr needs the company to cooperate.
Where Kubr services would have helped
Financial diligence
Offered in India- C1 Derivative transactions and their economic impact would not reconcile with reported earnings
- C12 Manual journal entries and adjustments to earnings accounts would reveal the smoothing practices
Valuation context
Offered in India- Peer multiples and the exit-multiple bridge would have shown how much of the story relied on valuation holding.
Model check
Offered in India- C1 Derivative transactions and their economic impact would not reconcile with reported earnings
Portfolio monitor
Offered in India- C1 Derivative transactions and their economic impact would not reconcile with reported earnings
Mapped from the checks each service runs. A hindsight reading of public records, not a promise that the failure would have been found.
Same pattern
A summary of public documents. It reports what the sources say. It is not Kubr's finding and not a statement of guilt.