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Countrywide CEO Mozilo settles with SEC for US$67.5M
Source: Agencies |
October 16, 2010, Saturday
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COUNTRYWIDE Financial Corp. co-founder Angelo Mozilo has agreed to a US$67.5 million settlement to avoid trial on civil fraud and insider trading charges that alleged he profited from doling out risky mortgages while misleading investors about the risks.
Two other former Countrywide executives also settled before trial next week on charges filed by the Securities and Exchange Commission. But employment agreements that protect the men from lawsuits involving the failed lender mean Bank of America Corp., which bought Countrywide in July 2008, will pick up most of the tab.
The settlement announced yesterday spares the executives the risk of a verdict that could have been used against them in lawsuits by shareholders, or by prosecutors if a criminal probe into their activities leads to charges.
It also gives the SEC the right to brag about what it said is the biggest financial penalty ever against a public company's senior executive. The agency has been criticized for doing little to prevent much of the risky behavior that led to the financial meltdown and for failing to detect Bernard Madoff's massive investment fraud.
"This settlement is a desirable result for all the parties," said Jacob Frenkel, a former SEC enforcement attorney now in private practice. "The SEC claims victory. The defendants get closure while preserving their ability to fight" lawsuits by shareholders.
The agreement requires Mozilo to repay US$45 million in ill-gotten profits and US$22.5 million in civil penalties. Former Countrywide President David Sambol owes US$5 million in profits and US$520,000 in civil penalties, and former Chief Financial Officer Eric P. Sieracki will pay US$130,000 in civil penalties.
It's "the fitting outcome for a corporate executive who deliberately disregarded his duty to investors by hiding what he saw in the executive suite," SEC Enforcement Director Robert Khuzami said in a conference call with reporters.
But US$25 million of Mozilo's restitution will come from an escrow fund the company set up to cover shareholder litigation and Mozilo has no obligation to pay the remaining amount, according to the settlement agreement.
The Charlotte, North Carolina-based bank, through its Countrywide subsidiary, will pay that US$20 million, according to a person familiar with the matter who wasn't authorized to speak publicly and spoke on condition of anonymity.
Sambol's agreement stipulates that his entire US$5 million forfeiture will come from the escrow fund.
The payments come on top of an US$8.4 billion settlement Bank of America made with 12 states in 2008 over Countrywide's lending practices. The company also agreed in August to pay US$600 million to end a class-action case from former Countrywide shareholders.
Two other former Countrywide executives also settled before trial next week on charges filed by the Securities and Exchange Commission. But employment agreements that protect the men from lawsuits involving the failed lender mean Bank of America Corp., which bought Countrywide in July 2008, will pick up most of the tab.
The settlement announced yesterday spares the executives the risk of a verdict that could have been used against them in lawsuits by shareholders, or by prosecutors if a criminal probe into their activities leads to charges.
It also gives the SEC the right to brag about what it said is the biggest financial penalty ever against a public company's senior executive. The agency has been criticized for doing little to prevent much of the risky behavior that led to the financial meltdown and for failing to detect Bernard Madoff's massive investment fraud.
"This settlement is a desirable result for all the parties," said Jacob Frenkel, a former SEC enforcement attorney now in private practice. "The SEC claims victory. The defendants get closure while preserving their ability to fight" lawsuits by shareholders.
The agreement requires Mozilo to repay US$45 million in ill-gotten profits and US$22.5 million in civil penalties. Former Countrywide President David Sambol owes US$5 million in profits and US$520,000 in civil penalties, and former Chief Financial Officer Eric P. Sieracki will pay US$130,000 in civil penalties.
It's "the fitting outcome for a corporate executive who deliberately disregarded his duty to investors by hiding what he saw in the executive suite," SEC Enforcement Director Robert Khuzami said in a conference call with reporters.
But US$25 million of Mozilo's restitution will come from an escrow fund the company set up to cover shareholder litigation and Mozilo has no obligation to pay the remaining amount, according to the settlement agreement.
The Charlotte, North Carolina-based bank, through its Countrywide subsidiary, will pay that US$20 million, according to a person familiar with the matter who wasn't authorized to speak publicly and spoke on condition of anonymity.
Sambol's agreement stipulates that his entire US$5 million forfeiture will come from the escrow fund.
The payments come on top of an US$8.4 billion settlement Bank of America made with 12 states in 2008 over Countrywide's lending practices. The company also agreed in August to pay US$600 million to end a class-action case from former Countrywide shareholders.
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