Financier at centre of the US mortgage crisis found hanged
Executive ran multibillion-dollar lender under investigation for accounting fraud
Thursday, 23 April 2009
One of the top executives at Freddie Mac, the mortgage giant seized by the US government, was found hanged in his suburban mansion yesterday, after months of escalating pressure on the company. The apparent suicide of David Kellermann, a 41-year-old family man, shocked people from the worlds of Wall Street and Washington, which have been locked together in a fractious embrace since the financial crisis engulfed both last autumn.
David Kellermann, a top executive at US mortgage firm Freddie Mac, was found hanged in his mansion
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Mr Kellermann was promoted to acting chief financial officer of Freddie Mac when it was seized by the government in September, amidst tens of billions of dollars of losses on sub-prime and other mortgages. The seizure all but wiped out the shareholdings of long-time executives such as Mr Kellermann, and since the nationalisation, regulators and the Justice Department have been crawling over the company's books to see if accounting irregularities may have contributed to its downfall.
The executive's wife called the emergency services at 4.48am yesterday after finding him hanging in the couple's basement. Police said there were no signs of foul play and described the incident as an "unattended death". Police sources told local reporters that Mr Kellermann did not leave a suicide note. At the stately red-brick home in the upmarket Virginia suburb of Vienna yesterday afternoon, relatives were comforting Mrs Kellermann and the couple's young daughter as they awaited autopsy results.
The Treasury Secretary, Timothy Geithner, led messages of condolence, saying he was "deeply saddened". The regulatory body which is overseeing Freddie Mac, the Federal Housing Finance Agency (FHFA), put out a statement describing Mr Kellermann as "a person of the utmost ethical standards, who was hardworking and knowledgeable in his field and an inspiration to his staff and many others who were privileged to work with him."
While many of Wall Street's most powerful financial institutions have been humbled by the credit crunch and their executives faced public opprobrium for the excesses that contributed to the crisis, few institutions have seen so dramatic a reversal in their fortunes as Freddie Mac and its sister company Fannie Mae. Together, the two firms own or guarantee more than half of the nation's outstanding mortgages and are deeply enmeshed in the housing market, where they have a government mandate to promote home ownership.
Republicans blame the two companies for inflating the housing bubble and their bloated finances were unable to withstand the market crash. Freddie Mac alone recorded a $23.9bn (£16.4bn) loss last year, and the two companies together have swallowed almost $60bn in government aid since nationalisation. The government owns 80 per cent of the two companies, while the old shareholders are still a vocal minority.
The Obama administration has increasingly been using the companies as tools of its programme to prop up the housing market and to ease the foreclosure crisis, but this has led to a series of running battles with executives at Freddie Mac, including Mr Kellermann. Last month, he led a group of rebel executives who insisted the company publicly declare that the Obama plan to provide foreclosure relief would cost the company $30bn.
At the same time, he was named as one of the executives being handed a large bonus to stay with the firm. It was disclosed he would get an $850,000 retention bonus, part of a $210m pool set aside to cover payments to 7,800 Fannie Mae and Freddie Mac employees which sparked public and political fury. Less than a month ago David Moffatt, the government-appointed chief executive of Freddie Mac, walked out after less than six months in his post, privately citing conflicts with the government.
John Koskinen, who was appointed acting chief executive, praised Mr Kellermann's "extraordinary work ethic and integrity" and said he will be most remembered for his "affability, personal warmth, sense of humour and quick wit".
Mr Kellermann had been at Freddie Mac for 16 years, rising from the rank of analyst. In his last role he was responsible for all of the company's accounting matters, including financial results and public disclosures.
The company revealed last month that it had received subpoenas from the Justice Department requesting accounting documents, and that regulators have also questioned senior executives, but it said yesterday it had no indication that the investigations were connected to Mr Kellermann's death.
The Kellermann family owned 43,000 shares of Freddie Mac stock last summer when they were worth $9 each. They are less than one-hundredth of that value now, and Mr Kellermann had been slowly cashing in what remained.
Depression victims: Credit crunch suicides
January 2009 Adolf Merckle was 74 and for a long time listed as the fifth-richest man in Germany. But at the start of this year his business bets had all backfired and he took his own life. His body was found 300 yards from his family's villa near Ulm. It quickly emerged that his empire was on the brink of collapse after his family had made serial wrong-way bets on the shares of Volkswagen.
December 2008 Rene-Thierry Magon de la Villehuchet, who was found dead at his desk in Manhattan days after the Madoff scandal broke, had funnelled $1.4bn of his own and clients' money into the Madoff business. In a note to his brother, the 65-year-old, one of the most prominent French figures on Wall Street, said he needed to be held accountable.
November 2008 Paulo Sergio Silva, 36, a trader for the brokerage arm of the Brazilian bank Itau, shot himself in the chest during afternoon trading on the floor of the Brazilian stock exchange.
September 2008 Kirk Stephenson, 47, jumped in front of a speeding train in Buckinghamshire. An inquest found that the former CEO of private equity firm Olivant had been facing "considerable financial loss".
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