Board nixed lower pay for Mozilo

Times Staff Writers

Two consultants hired by Countrywide Financial Corp. raised concerns about Chairman Angelo R. Mozilo’s lucrative pay package, but key recommendations were ignored and the company eventually hired a third advisor whose aim was to achieve “maximum opportunity” for Mozilo, documents show.

The result was a pay contract that “was significantly more generous to Mr. Mozilo” than originally recommended, according to a report released by a congressional panel Thursday.

The report was prepared in advance of today’s hearing of the House Committee on Oversight and Government Reform, where Mozillo and former chieftains of Merrill Lynch & Co. and Citigroup Inc. will be asked to explain how they managed to enrich themselves while their companies struggled in the wake of the mortgage meltdown.

“We’re trying to understand why these three gentlemen should collectively walk away with hundreds of millions of dollars while their companies are losing billions,” said Rep. Henry A. Waxman (D-Beverly Hills) in an interview. “It’s hard to know why we’re rewarding failure.”


Mozilo made $48.1 million in salary, bonuses and stock-based pay in 2006, the most recent year available. As the mortgage industry swooned in late 2006 and 2007, he cashed out stock options valued at about $140 million.

Countrywide’s shareholders, meanwhile, have lost nearly $23 billion in equity since February 2007, when the Calabasas-based company’s share price hit a $45.02 peak. On Thursday, the shares fell 50 cents to $5.20.

Mozilo declined to comment Thursday, although he has defended his compensation in the past as his rightful reward. The congressional report, however, said Countrywide’s board spurned recommendations to scale back the chairman’s pay.

In 2004, the committee report said, consultant Pearl Meyer “raised concerns about the compensation package Mr. Mozilo would receive after his planned retirement” as chief executive -- a package valued at $81 million in Countrywide’s 2007 proxy statement.

Countrywide’s board accepted some of the recommendations but rejected others, the report said, and then “ended its relationship with the consultant.”

The next consultant, Exequity, recommended “significant reductions” for Mozilo’s pay in 2006. The board instead retained the compensation firm of Towers Perrin, which was represented by consultant John England.

“Internal e-mails show that the consultant appeared to serve as Mr. Mozilo’s personal advisor with the goal of achieving ‘maximum opportunity’ for Mr. Mozilo,” the report said, adding that the pay package ultimately approved “appeared to heavily favor Mr. Mozilo.”

England advised the board to give Mozilo a $15-million “contract renewal” bonus in 2006 -- the year he was originally slated to retire -- and compare his pay with the nation’s largest investment banks, including Goldman Sachs and Merrill Lynch, instead of the smaller financial services companies that Exequity said better reflected Countrywide’s peer group.

The report said Countrywide’s board balked at giving Mozilo the $15-million contract renewal, but agreed to give him $10 million, describing it as “reimbursement for retirement payments he could have received had he retired.”

In an e-mail to Mozilo, England made it clear that he thought Mozilo should get more money. “My primary unhappiness with what the board has put forth is that it lowers your maximum opportunity significantly,” he wrote in October 2006.

A Towers Perrin spokesman denied that England served as an advocate for Mozilo.

“As a matter of policy, Towers Perrin is engaged for executive compensation consulting assignments by a company, either its management or the board or both, but not an individual executive,” spokesman Joseph Conway said in a statement. “Countrywide Financial engaged Towers Perrin and Towers Perrin neither represented nor acted as a personal advocate for Mr. Mozilo.”

The committee report also raised questions about changes Mozilo had made to his stock trading plan. Those changes, first reported by The Times last year, vastly increased the amount of shares that he was able to sell before the stock went into a tailspin. The sales are now being reviewed by the Securities and Exchange Commission.

Mozilo is not the only executive whose lofty pay has raised eyebrows. Lawmakers also plan to question Stanley O’Neal, former head of Merrill Lynch, and Charles Prince, former head of Citigroup. Both men were pushed out after their firms suffered billions of dollars in losses tied to ill-fated mortgage securities, and both received multimillion-dollar separation packages.

Yet in many ways Mozilo, 69, may be the star. Under his leadership, Countrywide helped shape the modern mortgage business, an industry that greatly expanded opportunities for homeownership, but whose high-cost and exotic loans have driven foreclosures to record levels. And the downfall of those loans -- some experts believe that 2 million mortgages could fail by 2009 -- now threatens the economy.

If the crisis has a face, it may belong to Mozilo. He is “the Ken Lay of 2008,” said Richard Ferlauto, director of pension and benefit policy at the American Federation of State, County and Municipal Employees, referring to the once-celebrated boss of Enron, who came to symbolize the recent era of corporate scandal and mismanagement.

In January, Bank of America Corp. announced plans to acquire Countrywide. Mozilo subsequently announced that he would voluntarily forfeit $37 million in separation pay.

For all the controversy, some of Mozilo’s critics view him as a complex figure whose genuine achievements are now overshadowed by the mortgage crisis.

“There’s an element of Greek tragedy,” said Robert Gnaizda, general counsel of the Greenlining Institute, a consumer advocacy group. “I think he sincerely wanted every American who wanted a home to have one. . . . But he was quite willing to do it in as reckless a fashion as necessary.”