SEC staff said to seek fraud case against Angelo Mozilo
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Countrywide Financial Corp. founder Angelo Mozilo may be facing federal civil fraud charges, the Wall Street Journal is reporting this afternoon.
From the Journal:
Staff at the Securities and Exchange Commission have decided to recommend filing civil fraud charges against Mozilo, according to people familiar with the investigation. The SEC sent a so-called Wells notice to Mr. Mozilo several weeks ago alerting him of the planned charges, the people said. The potential charges include alleged violations of insider-trading laws as well as failing to disclose material information to shareholders, according to one person familiar with the matter. A Wells notice is a precursor to a civil lawsuit in an SEC investigation. It outlines to an individual or company under investigation what charges might be filed against them and gives a target a chance to respond to the allegations. Mr. Mozilo’s attorneys could still persuade the SEC’s commissioners not to bring a case. David Siegel, an attorney for Mr. Mozilo couldn’t immediately be reached for comment. SEC officials also didn’t respond to calls for comment.
The SEC began investigating Mozilo after a Los Angeles Times report in September 2007 detailed his sale of $145 million in Countrywide stock in late 2006 and 2007 via automatic trading plans.
From a story by my colleagues Kathy M. Kristof and E. Scott Reckard last August:
Federal law bars a corporate executive from buying or selling the stock of his or her company while in possession of material nonpublic information about the firm, unless the trades are made under automatic plans established in advance. Mozilo launched such a plan in October 2006. But in the following two months, as problems in the subprime mortgage market mounted, he revised the plan once and launched an additional trading plan. Both moves allowed him to sell more shares. Countrywide said in 2007 that Mozilo had made the changes without regard to inside information. But legal experts said the modifications raised a red flag.
As its mortgage losses surged, Countrywide’s shares plunged from a peak of $45 in February 2007 to $5 by early 2008, when the mortgage giant hastily agreed to a takeover by Bank of America Corp.
-- Tom Petruno