Angelo Mozilo likely to face insider trading charges

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Securities and Exchange Commission staff have recommended that former Countrywide Financial CEO Angelo Mozilo face civil securities fraud charges.

The Wall Street Journalreports (subscription required) that the SEC has sent Mr. Mozilo a Wells Notice -- a document alerting its recipient that he will likely face SEC charges. The Journal says, "The potential charges include alleged violations of insider-trading laws as well as failing to disclose material information to shareholders, according to one person familiar with the matter."

This is a matter of symbolic significance more than anything else. In the vast, vast majority of these cases, the recipient of a Wells Notice agrees to settle the charges, pay a fine (almost always a small fraction of the defendant's net worth), and be barred from serving as an officer or director of a public company for a period of time. Given that Mozilo was born in 1938 and is the poster child for bad corporate governance and slimy lending practices, there's probably no risk he'll be hired to run another company again anytime soon (except maybe General Motors (GM), which apparently has no standards for hiring executives).

Symbolically though, Mr. Mozilo is the first of the high-profile subprime sleazebags to face any kind of federal scrutiny. Sure, a couple Bear Stearns hedge funds managers got in trouble but so far, the titans have been free to juggle assets and wait for the wheels of justice to grind.

Hopefully Mozilo is the beginning of an avalanche of similar Wells Notices.
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