In February 2006, former senator Warren Rudman of New Hampshire completed a 17-month investigation of an $11 billion accounting scandal at Fannie Mae (a major enterprise involved in home mortgage financing). The Rudman investigation concluded that Fannie Mae’s CFO and controller used an accounting gimmick to manipulate financial statements in order to meet earnings-per-share (EPS) targets. Meeting the EPS targets triggered bonus payments for the executives. Fannie Mae’s problems continued after 2006, and on September 8, 2008, it went into conservatorship under the control of the Federal Housing Financing Agency. The primary executives at the time of the Rudman investigation were replaced, and the enterprise reported a $59.8 billion loss in 2008. By June 2012, the federal government had spent $170 million to assist Fannie Mae as a result of mismanagement.

Required
Review the statement of ethical professional practice shown in Exhibit 10.19. Identify and comment on which of the ethical principles the CFO and controller violated..