The Securities and Exchange Commission announced yesterday it has charged former Countrywide Financial CEO, Angelo Mozilo, and two other former executives with securities fraud. The SEC said the executives deliberately mislead investors about significant credit risks taken in efforts to build and maintain the company’s market share. Mozilo was additionally charged with insider trading for selling his Countrywide stock for nearly $140 million in profits based on non-public information. Countrywide was based in Calabasas and a major employer in the San Fernando Valley area. When the mortgage crisis hit, the company went through hundreds of layoffs. Bank of America purchased Countrywide in 2008. Mozilo, former chief operating officer and president David Sambol, and former chief financial officer Eric Sieracki, misled the market by falsely assuring investors the company was primarily a prime quality mortgage lender, alleges the SEC. The SEC further alleges that from 2005 to 2007, Countrywide engaged in an unprecedented expansion of its underwriting guidelines and was writing increasingly risky loans. The company was required to disclose these trends to its investors in the Management Discussion and Analysis portion of its SEC filings, but failed to do so. The SEC’s complaint, filed in federal district court in Los Angeles, seeks permanent injunctive relief, officer and director bars, financial penalties against all of the defendants, and the disgorgement of ill-gotten gains with prejudgment interest against Mozilo and Sambol. Eric Billingsley
