Friday, October 15, 2010

$67.5 Million Settlement for Former Countrywide CEO

The economic crises resulted in many fraud allegations--now we are seeing some of the fallout of those allegations.  Angelo Mozilo has agreed to a $67.5 million settlement with the SEC over allegations of civil fraud and insider trading charges.  Mozilo did not admit to any wrongdoing in the settlement.  Via NYT:
The SEC accused the men of misleading shareholders about the quality of the loans on Countrywide's books. The civil complaint also accused Mozilo of acting on his inside knowledge of the company's precarious state when he sold shares between November 2006 and October 2007 ahead of its collapse, reaping more than $139 million.
The former Countrywide chairman is the nation's highest-profile defendant yet to face trial for risky business practices leading to the housing collapse that sent the country into recession.
In legal filings, regulators portrayed the three defendants as engaging in a single-minded pursuit of market dominance, even if it meant knowingly taking disastrous risks.
The company was a major player in the market for high-risk subprime mortgages and became the biggest U.S. mortgage lender overall before it spiraled into disaster when the mortgage meltdown hit.
Countrywide's lending practices are reportedly also the subject of a criminal probe in Los Angeles. Thom Mrozek, a spokesman for the U.S. attorney's office, declined to comment about the situation.
I am interested to see how the reported criminal probe plays out and to see what other fraud-related settlements come out of the subprime crisis.

1 comment:

  1. Dr. Zimbelman,

    Here are my thoughts which really arise from questioning as to what has been happening or actually not happening this year.

    Mr. Mozilo may or may not be criminaly charged here. But I question, particularly as of the last 4-5 months now, as to why there haven't been a wave of arrests and criminal convictions, particularly of some of the senior executives from Lehman, Bear Sterns, Goldman, etc.? Take Goldman for example. This past Spring they settled with the SEC and paid out over 500 million (just a drop in the bucket for them). The SEC at the same time didn't waste any time referring the case to the FBI. But to this day, we have nothing.

    There is at the same time speculation that the lack of any substantial law enforcement activity may be due to a Supreme Court action in Skilling vs. United States, wherein the high court limited the right of the honest services provision in 18 U.S.C. § 1346, for criminal fraud prosecutions. The challenge in the law is that to be able to pursue criminal cases against corporate executives for questionable conduct that involved some measure of dishonesty that caused harm to the company… it also must result in that executive(s) financially benefiting from that questionable conduct.

    Now with all of the egregious bonuses that Wall street has been paying themselves over the last few years (w. tax payer money no less), I fail to understand how the govt. can't prove that.

    Nevertheless,it reminds me of the old adage: He who has the gold makes the rules. Wall street has the gold + politicians make the rules = a free pass. Using Goldman as the prime example, let's not forget their historical presence in the White House. Hence, unless Mozilo has any serious political clout, he just may end up wearing bracelets in lieue of cufflinks.