The Associated Press WASHINGTON
Federal regulators yesterday charged Angelo Mozilo, the former chief executive of mortgage lender Countrywide Financial Corp., and two other company executives with civil fraud.
The U.S. Securities and Exchange Commission's civil lawsuit, filed in federal district court in Los Angeles, also accuses Mozilo of illegal insider trading.
Countrywide was a major player in the subprime mortgage market, the collapse of which in 2007 touched off the financial crisis that has gripped the U.S. and global economies.
Mozilo, 70, is the most high-profile individual to face formal charges from the federal government in the aftermath of the crisis. Mozilo has denied any wrongdoing.
Civil fraud charges also were filed against Countrywide's former chief operating officer David Sambol, 49, and ex-chief financial officer Eric Sieracki, 52.
The trio "deliberately misled'' Countrywide shareholders, SEC enforcement director Robert Khuzami said at a news conference. While they painted a picture of robust performance, the real Countrywide was "buckling under the weight" of soured mortgage loans, he added.
Khuzami said Mozilo reaped nearly $140 million US in illicit profits from his stock sales.
It was the first major case led by Khuzami, who joined the agency in March.
SEC Chair Mary Schapiro brought him in at a time when the agency was being assailed by lawmakers over its failure to detect the massive pyramid scheme run by fallen money manager Bernard Madoff despite red flags raised to its staff by outsiders over the course of a decade.
Sambol's lawyer Walter Brown said his client will fight the charges.
"The SEC wrongly asserts that Countrywide's disclosures to its investors regarding its lending criteria should have been more extensive, and that Mr. Sambol is somehow responsible for insufficient disclosure," said Brown. "Making groundless allegations and losing in court will not help the SEC restore its reputation. I am confident that Mr. Sambol will be vindicated completely"
The SEC and federal prosecutors have undertaken wide-ranging investigations of companies across the financial services industry, touching on mortgage lenders, the Wall Street investment banks that bundled home mortgages into securities sold to investors, and other market players.
The SEC's scrutiny of Mozilo's stock sales began in the fall of 2007 with an informal inquiry.
The filing of the agency's lawsuit is a striking turn for Mozilo, the man who 40 years ago co-founded what grew into the nation's largest mortgage lender. He moved the company in 1969 from New York to the housing hotbed of suburban Los Angeles, guiding Countrywide through numerous boom-and-bust housing cycles.
After the mortgage crisis hit, Calabasas, Calif.-based Countrywide was forced to cut thousands of jobs and saw its shares plummet. Its downward spiral ended with its sale to titan Bank of America in July 2008 for about $2.5 billion. Countrywide itself is the target of multiple lawsuits related to the mortgage meltdown.
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