Defense in Countrywide Financial fraud case asks judge to allot more time for trial

Share via

The federal civil fraud case against Countrywide Financial Corp. founder Angelo R. Mozilo and two other former company executives has grown far too complex to be tried in the three weeks allotted by the federal judge hearing the litigation, the defense says.

U.S. District Judge John J. Walters in Los Angeles should instead allow eight to 10 weeks for the trial, lawyers for the defendants said in a filing Monday.

The filing says the Securities and Exchange Commission, which brought the lawsuit, intends to call 22 witnesses and to introduce 2,000 documents as exhibits at the trial, scheduled to begin Oct. 19.

That compares with an estimate of 10 to 12 witnesses made in November by John M. McCoy III, the head SEC lawyer on the case, said the attorneys for Mozilo, former Countrywide President David Sambol and former Chief Financial Officer Eric P. Sieracki.

By the time the prosecution witnesses testify, “literally all of the three weeks set for trial will be consumed and the defendants will be left with NO time to put on a defense at all, much less a full one,” the defense filing says.

“And, of course, defendants intend to present a vigorous defense that, with time for the SEC to cross-examine witnesses, itself will require weeks of trial time.”

The three individual defendants have identified an additional 28 witnesses they expect to call at trial, plus 14 more they may call, the filing said.

Calabasas-based Countrywide employed 55,000 people and was generating $400 billion a year in mortgages during the time in question. Rocked by rising defaults, it appeared on the verge of collapse when it was acquired by Bank of America Corp. in 2008.

The SEC has accused the three former Countrywide executives of assuring investors that the big lender was being run prudently from 2005 through 2007 when in fact its loan origination procedures had become among the riskiest in the industry.

The defense contends that the risks were disclosed in various reports, regulatory filings and presentations to investors.

In addition to the securities fraud allegations leveled against all three defendants, Mozilo, who was Countrywide’s chairman and chief executive, is accused of insider trading through manipulation of stock-sale plans — allegations that the defense describes as a “case within a case” that normally would take one or two weeks to try on its own.

The trial will be watched closely by federal prosecutors who have taken grand jury testimony in a criminal probe dealing with Countrywide.

McCoy, who Monday was promoted to associate director of enforcement for the SEC’s regional office in Los Angeles, did not respond immediately to requests for comment.