SEC charges ex-Countrywide CEO Mozilo with fraud

UPDATED:

The founder and former CEO of subprime giant Countrywide Financial was charged with insider trading in a lawsuit filed Thursday by the Securities and Exchange Commission.

Angelo Mozilo, 70, is accused of illegally making $140 million by selling off company stock at a time when investors were misled about the overall health of the company.

According to the SEC, Countrywide told investors that it dealt mostly in stable mortgages when it actually dealt mainly in risky subprime mortgages. SEC said the Countrywide executives knew its reliance on the subprime market was a business model likely to fail.

The bottom line is that we are flying blind on how these loans will perform in a stressed environment of higher unemployment, reduced values and slowing home sales, Mr. Mozilo wrote in an email to another executive, according to the SEC.

Mr. Mozilo is the highest-ranking corporate official involved in the nation’s housing crisis to face legal action from U.S. authorities.

Chief operating officer and president David Sambol and former chief financial officer Eric Sieracki were also named in the SEC suit.

The panel does not bring criminal charges and has no power to jail. Instead, the SEC can impose financial penalties and bar individuals from working in the field it oversees — publicly-traded companies.

The Justice Department is investigating Countrywide on possible criminal violations but has not acted.

Countrywide Financial, which has ties to prominent lawmakers including Sen. Christopher J. Dodd, Connecticut Democrat, was the nation’s largest mortgage lender before the housing crash.

Bank of America bought the company last year.