June 4, 2009

Countrywide’s Mozilo accused of fraud

Countrywide Financial Corp. co-founder Angelo R. Mozilo and two former top executives were accused of fraud Wednesday by U.S. regulators.

The Security and Exchange Commission filed a civil lawsuit in federal court alleging Mozilo, former president David Sambol and former chief financial officer Eric Sieracki failed to warn shareholders of the extent of risk the Calabasis, Calif., company was taking on during the housing boom, the Los Angeles Times reported.

Mozilo, who was chief executive until Countrywide was bought by Bank of America in 2008, also is accused of insider trading, the newspaper said.

He knew that Countrywide was gambling with increasingly risky mortgages and he kept those details from investors while he was actively taking his own chips off the table,said Rosalind Tyson, director of the SEC's Los Angeles regional office.

The lawsuit also alleges Sambol and Sieracki were warned about the deteriorating quality of the company's loan portfolio and potential effect on the company's well-being down the road.

Thus, each of the defendants was aware, but failed to disclose, that Countrywide's current business model was unsustainable, the suit alleges.

Attorneys for the three men said the accusations were without basis, vowing a court fight.

Mr. Mozilo acted properly and lawfully at all times as the CEO of Countrywide, David Siegel, a lawyer for Mozilo, said in an e-mail.

Walter Brown said the SEC has no case against his client, Sambol, and said the suit is the result of the tremendous political pressure the SEC is facing given its well-publicized enforcement failures.

Shirli Weiss, an attorney for Sieracki, told the Times the former finance chief did not violate any securities laws and committed no fraud on anyone.