Countrywide (NYSE: CFC) directors and executives never did anything wrong? How can people tell? Because they say so.

The judge in a suit against the big mortgage company is not buying it. He wants a trial against the firm and its bosses to continue. According to The New York Times, the court ruled that management "must answer shareholder accusations of insider trading and an overall failure to monitor lending practices that led to the company's collapse."

The charges are serious enough to put some of the Countrywide people in jail, but are they important enough to get Bank of America (NYSE: BAC) to back away from its purchase of the company?

The case looks pretty bad for the mortgage company, at least on the face of it. Officers and directors sold $850 million worth of shares between 2004 and 2007. Toward the end of that period, the company was buying back $2.4 billion in stock, which would tend to keep the price up.

Almost no one would be unhappy to see some of the company's management behind bars. Countrywide issued huge numbers of mortgages to subprime borrowers, which reset at higher prices after the first few years. The homeowners could not make payments and often faced foreclosures. Countrywide got paid for each one of those, a clear reason it might have been aggressive in getting in more customers.

Countrywide executives cannot pay all of those people back, but they can make them license plates from inside a big federal prison.

Douglas A. McIntyre is an editor at 247wallst.com and the author of the Ten Stocks Under $10 letter.