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Prepared Witness Testimony The House Committee on Energy and Commerce
Freddie Mac: Accounting Standards Issues Raised in the Doty Report.
Subcommittee on Commerce, Trade, and Consumer Protection
Mr. James W. Barratt
Chairman Stearns, Ranking Member Schakowsky and members of the Subcommittee: Thank you for the invitation to appear here today. My name is James W. Barratt and I am a Senior Managing Director in the Forensic and Litigation Advisory Practice of FTI Consulting ("FTI") in Washington, DC. I am a CPA and have over 19 years of combined accounting, auditing, and investigative experience including serving several years as an accountant in the Division of Enforcement of the U.S. Securities and Exchange Commission. FTI Consulting is a publicly traded, multi-disciplined consulting firm with leading practices in the areas of financial restructuring and litigation consulting. In December 2002, James Doty of the law firm of Baker Botts, L.L.P. ("Baker Botts") retained FTI to provide forensic accounting consulting services in connection with an internal investigation requested by the Audit Committee of the Board of Directors of Freddie Mac. FTI possessed the forensic accounting experience and electronic evidence consulting resources to assist in conducting the investigation. Over the course of several months, members of FTI and Baker Botts worked closely together to conduct the internal investigation. The FTI forensic accounting teams performed analyses of various accounting and financial reporting issues related to complex derivative transactions and reserve accounts. The FTI electronic evidence team supported the forensic accountants and the attorneys in the electronic evidence gathering and analysis process. That process included the imaging of numerous hard drives, obtaining and storing e-mails and other data from network servers, and identifying relevant documents through keyword searches and other techniques. On July 23, 2003, the Report on the results of this investigation into accounting and financial reporting matters was made to the Board of Directors of Freddie Mac. As stated in the Report, our purpose was to conduct a fact-finding investigation. To that end, FTI has assisted Baker Botts in developing an understanding of the structure, execution, and accounting implications of each of the specific transactions. Our purpose has not been to test whether the accounting was correct because the Company has already determined that the accounting was in error. I welcome the opportunity to assist the Subcommittee in the hearing today.
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