Countrywide's Mozilo charged with fraud, insider trading by SEC
A civil lawsuit filed by the SEC alleges that Mozilo knew that increasingly lax mortgage underwriting standards at Countrywide, once a heavyweight in the subprime home loan industry, would endanger the company but failed to disclose the risk to investors.
"Countrywide portrayed itself as underwriting mainly prime quality mortgages using high underwriting standards," said SEC enforcement chief Robert Khuzami in a statement. "But concealed from shareholders was the true Countrywide, an increasingly reckless lender assuming greater and greater risk."
Two other Countrywide executives were also charged with securities fraud, according to the SEC.
The insider trading charges stem from pre-arranged stock sales Mozilo executed in 2007, the Associated Press reported. The SEC accused him of illegally using information not known to the public or investors to profit from the trades.
Mozilo's lawyer, David Siegel of Irell & Manella in Los Angeles, last month dismissed allegations of insider trading as "scandalous and inconsistent with even a cursory examination of the facts," according to Bloomberg News.
Once the biggest mortgage lender in the country, Countrywide was hit hard as more and more of the borrowers to whom it had given subprime loans fell behind on payments and defaulted in 2007. Badly damaged by losses, it sold itself to Bank of America (BAC) in early 2008.