Here’s the actual law suit.
Basically the SEC is going after Mozilo for assuring investors that they were a prime loan lender when they were actually pushing very high risk loans. In fact they were the #1 subprime lender.
Former Countrywide Financial Corp. Chief Executive Officer Angelo Mozilo and two other people were accused of fraud by the U.S. Securities and Exchange Commission following an investigation of the firm’s role in the subprime mortgage crisis.
“This is the tale of two companies,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “Countrywide portrayed itself as underwriting mainly prime quality mortgages using high underwriting standards. But concealed from shareholders was the true Countrywide, an increasingly reckless lender assuming greater and greater risk. Angelo Mozilo privately described one Countrywide product as ‘toxic,’ and said another’s performance was so uncertain that Countrywide was ‘flying blind.'”
This has been brewing for a while.
He has a number of other cases as well, although Countrywide (BofA) is covering his legal expenses.
Mozilo, a defendant in at least 115 other civil cases, already has in place a defense team from Irell & Manella (which is being paid by Countrywide and its insurers). Irell partner David Siegel issued a prepared statement on the SEC charges.
I am getting the feeling that there will be a number of other former executives with big paydays for dubious reasons that are going to get their own press releases. The SEC is trying to get it’s groove back.
Carl W. Tobias, a law professor at University of Richmond, said he expected to see more such cases brought by the S.E.C. “The S.E.C. would like to have back the reputation that many feel it has lost as an aggressive enforcer,” Mr. Tobias said. “I wouldn’t be surprised to see other cases.”
I’m not advocating rampant litigation but the US can’t restore investor confidence if it doesn’t regulate and enforce laws on the books.
This is simply part of the de-leveraging process.