Countrywide’s Angelo R. Mozilo in talks to settle SEC charges, sources say


Just days before his trial was to begin, Countrywide Financial Corp. co-founder Angelo R. Mozilo was in serious negotiations late Thursday to settle the government’s civil fraud and insider trading case against him, according to people familiar with the situation.

Mozilo, 71, the best-known and perhaps most vilified figure involved in the mortgage industry’s boom and collapse, faced trial on the Securities and Exchange Commission accusations starting Tuesday.

A settlement, if finalized, would be discussed at a Friday morning status conference before U.S. District Judge John F. Walter in Los Angeles, according to those close to the case. Walter scheduled the hearing late Thursday, posting notice of it on the court’s online docket.


Details of the settlement couldn’t immediately be determined, although defendants in SEC cases generally settle them without admitting or denying wrongdoing.

The SEC’s lawsuit, filed in June 2009, also accuses former Countrywide President David Sambol and former Chief Financial Officer Eric P. Sieracki of securities fraud. It wasn’t clear whether they, too, were close to settling the lawsuit.

Mozilo attorney David Siegel, Sambol attorney Walter Brown and Sieracki attorney Shirli Weiss did not return calls seeking comment. A spokesman for the SEC’s enforcement division declined to comment.

Securities fraud expert John Coffee, a professor at Columbia Law School, said a settlement could help Mozilo in fighting other civil cases arising out of the Countrywide collapse.

“Any verdict in favor of the SEC would permit private plaintiffs to free ride on it and utilize those findings in their cases,” Coffee said.

A settlement, on the other hand, often doesn’t require a plaintiff to admit to any wrongdoing. Coffee said it would allow Mozilo to “deny everything in other litigation.”


A criminal investigation of Mozilo remains open, people with knowledge of the probe said. If the SEC case is settled, federal prosecutors will not see how the evidence against Mozilo plays out in a civil trial — which could factor into their decision on whether to bring charges. Criminal charges carry a higher standard of proof.

The sources spoke on condition of anonymity because they were not authorized to publicly discuss the sensitive investigation or the potential settlement of the SEC’s civil case.

The son of a Bronx butcher, Mozilo co-founded Countrywide in 1969 and oversaw its ascent to become the nation’s No. 1 mortgage originator. Initially a maker of loans that could be insured or guaranteed by government-sponsored agencies, Calabasas-based Countrywide diversified into a major maker of the subprime and other high-risk mortgages that kicked the housing boom into high gear.

But as the real estate market turned sour, the company racked up huge losses, and its financial support from Wall Street evaporated. Countrywide lost $1.6 billion during the second half of 2007 and was acquired by Bank of America Corp. early the next year.

The SEC accused the three former executives of representing to investors that Countrywide was a prudent lender when, in fact, it had become hugely risky with the potential for major losses. The defendants contended that they had adequately revealed risks and the condition of Countrywide’s loans.

The SEC also accused Mozilo alone of insider trading — allegations stemming from repeated changes made in late 2006 and early 2007 to his plan for regularly cashing in stock options. The changes, first reported by The Times, allegedly allowed him to improperly unload hundreds of thousands of additional shares before Countrywide stock went into a tailspin.


The agency had been seeking a court order barring the three from serving as officers or directors of public companies. And it was trying to recover millions of dollars in allegedly ill-gotten profits from Mozilo and Sambol, who also benefited from sales of stock at the time that, the SEC alleges, they were misrepresenting the company’s risks.

Bank of America recently agreed to pay $600 million to settle private lawsuits filed by investors who contended that Countrywide misled them, causing them to lose money when the company’s fortunes declined.