Thursday June 4, 09:30 PM
Ex-Countrywide CEO accused on fraud
WASHINGTON (AFP) - US regulators Thursday filed civil fraud charges against the former chief executive of failed mortgage giant Countrywide Financial (NYSE: CFC - news) , saying he misled investors about the company's risky loans.
The Securities and Exchange Commission announced the charges against Angelo Mozilo and two other former executives of what had been the largest US mortgage lender.
They were charged with securities fraud "for deliberately misleading investors about the significant credit risks being taken in efforts to build and maintain the company's market share," the SEC said in a statement.
Mozilo was also charged with insider trading for selling his Countrywide (LSE: CWD.L - news) stock based on non-public information, allowing him to reap nearly 140 million dollars in profits.
The SEC said that Mozilo along with former chief operating officer and president David Sambol and former chief financial officer Eric Sieracki "misled the market by falsely assuring investors that Countrywide was primarily a prime quality mortgage lender that had avoided the excesses of its competitors."
The SEC said that from 2005 through 2007, Countrywide "engaged in an unprecedented expansion of its underwriting guidelines and was writing riskier and riskier loans."
The big lender "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," said Robert Khuzami, the SEC's enforcement chief.
"Angelo Mozilo privately described one Countrywide product as 'toxic,' and said another's performance was so uncertain that Countrywide was 'flying blind.'"
The SEC complaint alleges that Mozilo, Sambol, and Sieracki "actually knew, and acknowledged internally, that Countrywide was writing increasingly risky loans and that defaults and delinquencies would rise as a result."
Bank of America (NYSE: IKJ - news) last July completed its purchase of Countrywide, the largest US mortgage lender that had been at the center of the country's subprime loan crisis.
The bank agreed to pay four billion dollars in shares for Countrywide in a deal that rescued the nation's largest mortgage lender from a collapse that could have sent shock waves through the world's biggest economy.
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