- Why now and not during the credit bubble?
- Why Mozilo and not all the other subprime mortgage execs?
- Why not Thain, Ken Lewis, Richard Fuld, Alan Schwartz and the many others who brought their company to the ground and lied to their shareholders?
There's no way to regulate all the companies and avoid fraud. Investors should do their homework. The only way to do that is to enforce total transparency nothing more.
Disclosure of all insider trading should be done. Executive selling big stakes of their companies should be a warning big enough. BlackStone going public should have been a warning big enough.
Enforcing very good accounting practices should be another one. Instead we are seeing the opposite moves in the current climate.
(Bloomberg) -- The day after Countrywide Financial Corp. Chief Executive Officer Angelo Mozilo arranged to start $139 million in stock sales, he told two top deputies there was “no way” to value one of its most popular mortgages.
“We are flying blind on how these loans will perform in a stressed environment of higher unemployment, reduced values and slowing home sales,” he wrote in a 2006 e-mail released yesterday by the Securities and Exchange Commission. “We have no way, with any reasonable certainty, to assess the real risk of holding these loans on our balance sheet.”
Mozilo, 70, co-founded Countrywide in 1969 and built it into the nation’s biggest home lender. Yesterday he became the most prominent executive targeted by the SEC in a regulatory autopsy of the subprime crisis. He, and the two deputies who received his e-mails on so-called pay-option ARM loans, were accused of hiding deteriorating lending standards before the housing bubble burst. The agency quoted Mozilo’s messages, arguing he avoided losses by making illegal insider trades.
“While hiding his hand from investors, Mozilo was actively taking his own chips off the table” SEC enforcement chief Robert Khuzami told journalists in Washington. “Concealed from shareholders was the true Countrywide, an increasingly reckless lender assuming greater and greater risk.”
The defendants, including former Chief Operating Officer David Sambol, 49, and Chief Financial Officer Eric Sieracki, 52, deny wrongdoing. Their lawyers accused the SEC of succumbing to political pressure and cherry-picking quotes from e-mails to build a case. [...]
Sieracki bought Countrywide stock during the period the SEC claims he believed the company was withholding information from the market, said his lawyer, Shirli Weiss. He said Sieracki didn’t violate securities law and called the lawsuit “completely without merit.”
The company has repeatedly come under fire from U.S. officials including Senator Charles Schumer for lax lending standards and its compensation packages.
“Under Angelo Mozilo, Countrywide became the poster child for unconscionable behavior by mortgage lenders,” Schumer, a New York Democrat, said in a statement yesterday. “This is a company that turned the American dream into a nightmare for thousands of innocent borrowers, and misled their shareholders along the way.”
The case is Securities and Exchange Commission v. Mozilo et al, 09-3994, U.S. District Court, Central District of California (Los Angeles).