SEC escalates probe of Mozilo
Securities regulators have stepped up their investigation of mortgage giant Countrywide Financial Corp. and its former chief executive, Angelo R. Mozilo.
Bank of America Corp., which acquired Calabasas-based Countrywide last month, said in a regulatory filing Thursday that the Securities and Exchange Commission was conducting a formal inquiry of the lender and that it had responded to subpoenas from the federal agency.
The filing doesn’t say what the SEC is looking at, but people close to the probe say it represents an escalation of an informal investigation launched last year and is focused on whether Mozilo violated insider-trading law and whether Countrywide’s financial disclosures misled investors.
Bank of America declined to elaborate on the filing.
Mozilo, reached at his home in Thousand Oaks, declined to comment, as did Sandor E. Samuels, Countrywide’s in-house legal counsel, and Gregory Weingart, its outside counsel at law firm Munger, Tolles & Olsen in Los Angeles.
Countrywide also faces probes by the FBI and several states looking primarily into whether the company engaged in improper lending practices, including making loans to people who did not have the ability to repay.
The SEC began investigating Mozilo after a Los Angeles Times report in September detailed his sale of $145 million in Countrywide stock in late 2006 and 2007 via automatic trading plans.
Federal law bars a corporate executive from buying or selling the stock of his or her company while in possession of material nonpublic information about the firm, unless the trades are made under automatic plans established in advance.
Mozilo launched such a plan in October 2006. But in the following two months, as problems in the subprime mortgage market mounted, he revised the plan once and launched an additional trading plan. Both moves allowed him to sell more shares.
Countrywide said last fall that Mozilo had made the changes without regard to inside information. But legal experts said the modifications raised a red flag.
Bank of America acquired Countrywide for about $5 a share, or $2.5 billion, in stock. Countrywide’s share price peaked at $45.03 in February 2007.