NEW YORK (CNNMoney.com) -- The Securities and Exchange Commission on Thursday filed securities fraud charges against former Countrywide Chief Executive Angelo Mozilo and two other former executives.
The trio was charged with deliberately misleading investors by telling them the company was a quality lender of mostly prime mortgages and had prudent underwriting standards, while it actually was engaging in very risky lending practices in order to build and maintain market share.
Mozilo was also charged with insider trading for selling his Countrywide stock for nearly $140 million in profits while knowing that Countrywide's business model was deteriorating.
Along with Mozilo, the SEC charged former Chief Operating Officer and President David Sambol and former Chief Financial Officer Eric Sieracki with hiding the company's true practices and condition from shareholders.
"This is the tale of two companies," said Robert Khuzami, director of the SEC's Division of Enforcement. "Countrywide portrayed itself as underwriting mainly prime quality mortgages using high underwriting standards. But concealed from shareholders was the true Countrywide, an increasingly reckless lender assuming greater and greater risk."
His role in with FannieMae:
The Mudd in question is the son of Roger Mudd and as head of Fannie he was pressured into many of the deals that devastated the company and a significant amount of this country:
You Need Us’Shortly after he became chief executive, Mr. Mudd traveled to the California offices of Angelo R. Mozilo, the head of Countrywide Financial, then the nation’s largest mortgage lender. Fannie had a longstanding and lucrative relationship with Countrywide, which sold more loans to Fannie than anyone else
But at that meeting, Mr. Mozilo, a butcher’s son who had almost single-handedly built Countrywide into a financial powerhouse, threatened to upend their partnership unless Fannie started buying Countrywide’s riskier loans.
Mr. Mozilo, who did not return telephone calls seeking comment, told Mr. Mudd that Countrywide had other options. For example, Wall Street had recently jumped into the market for risky mortgages. Firms like Bear Stearns, Lehman Brothers and Goldman Sachs had started bundling home loans and selling them to investors — bypassing Fannie and dealing with Countrywide directly.
“You’re becoming irrelevant,” Mr. Mozilo told Mr. Mudd, according to two people with knowledge of the meeting who requested anonymity because the talks were confidential. In the previous year, Fannie had already lost 56 percent of its loan-reselling business to Wall Street and other competitors.“You need us more than we need you,” Mr. Mozilo said, “and if you don’t take these loans, you’ll find you can lose much more.”
Then Mr. Mozilo offered everyone a breath mint.
And how much money did he make?
Countrywide Financial's chief executive, Angelo Mozilo, realized $121.5 million from exercising stock options and was awarded $22.1 million of compensation in 2007, a year when the housing slump pummeled the nation's largest mortgage lender.
The awards came in a year when Countrywide lost $704 million, its first loss in more than 30 years, and its shares declined 79 percent.
Mozilo, long criticized for his compensation packages, realized the option gains by acquiring and selling 4.92 million shares under a prearranged trading plan, Countrywide said in a filing Thursday with the Securities and Exchange Commission.
Mozilo's compensation fell 49 percent from a reported $43 million in 2006. The bulk of his 2007 compensation was from $20 million of stock and option awards made early in 2007, before borrower defaults soared and liquidity grew tight.
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