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October 15, 2010
Countrywide’s Former Chief in Settlement of Fraud Case
By GRETCHEN MORGENSON
Angelo R. Mozilo, the founder and former chief executive of Countrywide Financial, once the nation’s largest mortgage lender, agreed to pay $67.5 million Friday to settle a civil fraud case brought by the Securities and Exchange Commission last year.
The settlement came just days before the case against Mr. Mozilo and two former colleagues was scheduled to go to trial before a jury in Los Angeles.
The two colleagues settled their cases Friday as well. David Sambol, the former president of Countrywide, agreed to pay $5.52 million, and Eric Sieracki, the former chief financial officer, consented to $130,000.
Under the agreement, the three men did not admit wrongdoing.
Mr. Mozilo’s agreement with the government represents a humbling moment for one of most audacious and flamboyant chief executives in the financial industry. The son of a Bronx butcher, Mr. Mozilo started Countrywide in 1969 with David Loeb, a business partner; together the men built the company into a behemoth with $11.4 billion in revenues at its peak in 2006.
But Countrywide’s foray into subprime lending and other risky loans led to its downfall, and in early 2008, hobbled by mounting losses on loans, the company was purchased by Bank of America in a fire sale. Mr. Mozilo left the company shortly thereafter.
In its complaint filed in June 2009, the S.E.C. had accused Mr. Mozilo, Mr. Sambol and Mr. Sieracki of hiding from investors the growing risks in Countrywide’s operations. The complaint also contended that Mr. Mozilo and Mr. Sambol improperly generated profits on insider stock sales even as they were alerted to the company’s widening woes.
Mr. Mozilo was not present for the court hearing.
Robert Khuzami, director of enforcement at the S.E.C., said in a statement: “Mozilo’s record penalty is the fitting outcome for a corporate executive who deliberately disregarded his duties to investors by concealing what he saw from inside the executive suite – a looming disaster in which Countrywide was buckling under the weight of increasing risky mortgage underwriting, mounting defaults and delinquencies, and a deteriorating business model.”
Mr. Mozilo’s trial had been widely anticipated because it represented one of the few public prosecutions of a case against a major participant in the mortgage crisis. Still, both the defense and the prosecution faced big risks if they lost at trial, legal experts said, and this may have propelled the recent negotiations to bring about the deal. The settlement was approved by John F. Walter, the federal judge overseeing the case.
Had the S.E.C. won the case, it would have helped the agency re-establish its reputation as an investor advocate, which was badly damaged by inaction in the years leading up to the Madoff Ponzi scheme and the mortgage debacle. A loss would have been another black eye for the S.E.C.
A victory would also have been crucial for Mr. Mozilo, who would be concerned that a criminal prosecution might follow a loss in the civil case.
http://www.nytimes.com/2010/10/16/bu...rywide.html?hp
Like overhead, the price of doing business....
Countrywide’s Former Chief in Settlement of Fraud Case
By GRETCHEN MORGENSON
Angelo R. Mozilo, the founder and former chief executive of Countrywide Financial, once the nation’s largest mortgage lender, agreed to pay $67.5 million Friday to settle a civil fraud case brought by the Securities and Exchange Commission last year.
The settlement came just days before the case against Mr. Mozilo and two former colleagues was scheduled to go to trial before a jury in Los Angeles.
The two colleagues settled their cases Friday as well. David Sambol, the former president of Countrywide, agreed to pay $5.52 million, and Eric Sieracki, the former chief financial officer, consented to $130,000.
Under the agreement, the three men did not admit wrongdoing.
Mr. Mozilo’s agreement with the government represents a humbling moment for one of most audacious and flamboyant chief executives in the financial industry. The son of a Bronx butcher, Mr. Mozilo started Countrywide in 1969 with David Loeb, a business partner; together the men built the company into a behemoth with $11.4 billion in revenues at its peak in 2006.
But Countrywide’s foray into subprime lending and other risky loans led to its downfall, and in early 2008, hobbled by mounting losses on loans, the company was purchased by Bank of America in a fire sale. Mr. Mozilo left the company shortly thereafter.
In its complaint filed in June 2009, the S.E.C. had accused Mr. Mozilo, Mr. Sambol and Mr. Sieracki of hiding from investors the growing risks in Countrywide’s operations. The complaint also contended that Mr. Mozilo and Mr. Sambol improperly generated profits on insider stock sales even as they were alerted to the company’s widening woes.
Mr. Mozilo was not present for the court hearing.
Robert Khuzami, director of enforcement at the S.E.C., said in a statement: “Mozilo’s record penalty is the fitting outcome for a corporate executive who deliberately disregarded his duties to investors by concealing what he saw from inside the executive suite – a looming disaster in which Countrywide was buckling under the weight of increasing risky mortgage underwriting, mounting defaults and delinquencies, and a deteriorating business model.”
Mr. Mozilo’s trial had been widely anticipated because it represented one of the few public prosecutions of a case against a major participant in the mortgage crisis. Still, both the defense and the prosecution faced big risks if they lost at trial, legal experts said, and this may have propelled the recent negotiations to bring about the deal. The settlement was approved by John F. Walter, the federal judge overseeing the case.
Had the S.E.C. won the case, it would have helped the agency re-establish its reputation as an investor advocate, which was badly damaged by inaction in the years leading up to the Madoff Ponzi scheme and the mortgage debacle. A loss would have been another black eye for the S.E.C.
A victory would also have been crucial for Mr. Mozilo, who would be concerned that a criminal prosecution might follow a loss in the civil case.
http://www.nytimes.com/2010/10/16/bu...rywide.html?hp
Angelo R. Mozilo has pocketed $410 million in salary, bonuses and stock-option gains since he became executive chairman of mortgage lender Countrywide Financial in 1999, according to the executive compensation company Equilar.
Now, the man at the center of the national mortgage crisis stands to collect an additional $112 million in severance when Bank of America buys the company he helped found.
Equilar's numbers are based on Countrywide's most recent proxy statement, which is a year old. According to the statement, if Countrywide is acquired and Mozilo leaves, he is entitled to a cash severance of $88 million. He would also receive a retirement package worth $24 million.
(from the Washington Post, January 2008)
Now, the man at the center of the national mortgage crisis stands to collect an additional $112 million in severance when Bank of America buys the company he helped found.
Equilar's numbers are based on Countrywide's most recent proxy statement, which is a year old. According to the statement, if Countrywide is acquired and Mozilo leaves, he is entitled to a cash severance of $88 million. He would also receive a retirement package worth $24 million.
(from the Washington Post, January 2008)
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