WASHINGTON, June 4, 2009
SEC Charges Ex-Countrywide CEO With Fraud
Angelo Mozilo, Former Head Of Major Player In Subprime Mortgage Market, Also Accused Of Insider Trading
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(AP / file)
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The Securities and Exchange Commission's case also accuses Mozilo of illegal insider trading, an agency spokesman said Thursday.
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.
At its peak in 2005, Countrywide was known as the "Subprime King" and the nation's largest home loan lender - supplying $490 billion in mortgage lending in one year alone, reports CBS News investigative producer Laura Strickler. The SEC complaint notes that the risks of the collapse were foreseen by Mozilo and his two top executives as early as September 2004.
The SEC complaint describes emails detailing how Mozilo characterized the "sub prime seconds" loans as toxic. In an email dated April 17, 2006, Mozilo wrote, "In all my years in the business I have never seen a more toxic product."
Mozilo is the most high-profile individual to face formal charges from the federal government in the aftermath of the crisis.Read Mozilo's email here.
Mozilo has denied any wrongdoing.
"The lawsuit filed today by the SEC does not reflect a balanced or fair consideration of the facts or the law," said Mozilo's attorney David Siegel in an email statement. "The SEC's allegations are baseless; Mr. Mozilo acted properly and lawfully at all times as the CEO of Countrywide."
Civil fraud charges also were filed against Countrywide's former chief operating officer David Sambol and ex-chief financial officer Eric Sieracki.
Paul Kranhold, a spokesman for Sambol, declined to comment because he hadn't seen the charges yet. An e-mail message to Sieracki's attorney, Shirli Fabbri Weiss, was not immediately returned.
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 civil lawsuit in federal court in Los Angeles 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 in it being bought by titan Bank of America Corp. in July 2008 for about $2.5 billion. Countrywide itself is the target of multiple lawsuits related to the mortgage meltdown.
Mozilo's influence stretched from the California real estate market through the corridors of power in Washington.
The Democrats were roiled a year ago by revelations that Sens. Christopher Dodd, the chairman of the Senate Banking Committee, and Kent Conrad, head of the Budget Committee, got mortgages at favorable rates through a VIP program dispensed by Countrywide for so-called "friends of Angelo."
Dodd insisted that the controversy over the two loans he received did not compromise his ability to lead Congress' efforts to address the effects of the subprime mortgage meltdown.
Mozilo sold about $130 million in Countrywide stock in the first half of 2007 through a prearranged 10b5-1 trading plan. These plans, popular among corporate executives, allow a company insider to set up a program in advance for such transactions and proceed with them even if he or she comes into possession of significant nonpublic information.
North Carolina's state treasurer, who asked the SEC in 2007 to investigate Mozilo's stock sales, raised questions about changes made to Mozilo's plan in the months before the company's stock plunged, which allowed Mozilo to significantly increase his sales of Countrywide shares.
Mozilo had sold company shares through prior arrangements since 2004; the pace of his sales began to quicken in October 2006 when he put a new plan into effect. Mozilo has said that he did so to reduce his stake in Countrywide and diversify his personal investments in an orderly fashion before his retirement, which was slated for December 2009.
© MMIX, CBS Interactive Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.
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Well said I have known this for a long time. As I have said the problem with deregulation started with the GOP and now they have been caught and don't want to even accept any blame but say it is this ones fault and that ones fault.
And they wonder why they are losing elecitons.
I am predicting that after the next elections the country will lunge forward in a jerking motion held back by the wacko reactionary party. This of course will not teach them to moderate they will become more insistant and throw more mud hoping that some will stick. When in fact it will stick to them and that may very well be their undoing.
Hey alphaa10-as for madoff, do some research lemming. The crook gave big, big bucks to chuckie schumer, hill clinton, charlie "I don't pay taxes" rangle, b hussien (we can say that now) AND the dem party in general. No money to the GOP.
But hey, you guys take no hear for anything, do you?
Now, will they connect the dots to the Republican and Democratic politicians that took those political contributions to their benefit wile the public suffered...
contributions
loan deals the common public person can't get.
employment of relatives at salaries greater than the common public person could command.
free use of corporate assets (planes, vacation houses, sports boxes, etc.)
EVEN JUDGES DARED NOT INTERVENE- With the Supreme Court packed with conservative cronies. This was how they got away with all the criminality for so long.
There should be a special investigation into the Bush/Cheney years for all the truth to come out.
What struck me is that we've seen enough scams over the last 10 years, from the Internet bubble to Enron to the whole housing fiasco and Wall Street and their credit default swaps. There's nobody checking on this stuff. Insiders know that the thing is gonna blow, and somehow the government doesn't know or doesn't care. Nobody in the media picks it up because the media guys really don't know much. They think they're geniuses but they're not.
These things go on for years and everybody on the inside says "Wow, it's gonna blow. We better sell our stock." Sell your stock, get the cash, and send it to the Swiss bank, send it to the Cayman Islands, bury it in the Arabian desert somewhere in the Middle East. And then when the SEC finally wakes up out of its coma, they're gonna impose a fine. And Mozilo will just write a check off that Swiss bank account and serve no jail time. He'll just pay a fine and admit no wrongdoing. That's probably what will happen.
Ain't the American system of justice great????
The Wall Street Journal reported in December 18, 2006, the SEC launched in investigation of Madoff on January 4, 2006, but dropped the investigation-- despite clearly misleading statements from Madoff.
All because, as the SEC investigators concluded, "those violations were not so serious as to warrant an enforcement action."
Apparently, the overriding importance in 2006 of leaving Wall Street unregulated-- even if that means overlooking a crime in progress-- meant uncovering Madoff's Ponzi scheme would have to wait until another day, if ever.
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Speaking of "foaming at the mouth", and despite your seemingly impartial moniker "bothR2blame31", you are beside yourself with the same partisan "insanity" you attribute to Democrats.
Not for the first time, of course. Anyone who tunes into Faux News or wastes an hour with O'Reilly, O'Hannity, O'Coulter or O'Limbaugh has found Faux News the Mother of All Prevarications, and cannot emerge with unblemished judgment.
bothR2blame31 said, "The SEC is the swindlers and banksters and fraudsters... They're the same ones who gave Madoff a free pass for 11 years."
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Not exactly. A free pass for Madoff during the Bush term, certainly. In fact, SEC enforcement under Bush (and Chris Cox, in particular) became something of a joke.
Even John McCain, a noted booster of GOP DEregulation policy on Wall Street, said if he were president he would fire Cox for turning Wall Street into a "casino".
Clinton Had No Responsibility for Madoff--
The final two years of the Clinton term is a different situation altogether.
The problem at that time was definitely not SEC enforcement under Levitt, but the House Energy and Commerce Committee which funds the SEC-- then under Chairman Rep. Billy Tauzin (R, LA).
Yes, it was Rep. Billy Tauzin (R, LA) who told SEC chairman Levitt he would need new fiscal underpinnings if he intended to walk Wall Street as regulator.
Levitt took that as a threat, especially since the GOP ran the US House at the time, and Tauzin signed off on SEC funding. In all likelihood, that was the threat Tauzin intended.
Drink your fill of the reference below, which shows what actually happened-- and now you can blame the GOP doctrine of DEregulation.
http://www.singerpubs.com/ethikos/html/levitt.html
(Quotation from the above link--)
Says Levitt, "In the spring and summer of 2000, when our auditor independence rules were being hotly debated, Tauzin [Billy Tauzin, Chairman of the House Energy and Commerce Committee] was relentless. He sent three separate letters warning the SEC to back down. One five page letter demanded the answers to sixteen questions on such matters as the SEC?s statutory authority to issue the rules, the empirical evidence that rules were necessary, and whether SEC employees were subject to the same stock-owning restrictions as accountants."
Bush Did Have Responsibility for Madoff--
The failure of Bush to investigate Madoff during the eight years of the Bush watch has nothing to do with Clinton, but everything to do with the GOP policy of DEregulation for Wall Street.
Despite what some have suggested, neither Clinton nor Levitt of the SEC had created a double-jeopardy threat to Madoff, because they never accused, indicted or even investigated Madoff. Under Clinton, Madoff was not investigated, thanks to the war between Levitt and Tauzin-- much less tried and acquitted on ANY set of facts.
This left Madoff wide open for investigation and prosecution when Tauzin's GOP ally, George W. Bush, entered office the next year.
Yet, predictably enough, that investigation never happened. Bush managed for eight, long years to ignore Madoff. During the five years preceding SEC chairman Cox and in the three years afterward, there was no SEC investigation of Madoff under Bush because the GOP-- and Tauzin, in particular-- opposed regulation of Wall Street.
Right?
lollllllll.....
Just the mug on Angelo says "crook".....
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