Do you remember Countrywide Mortgage? Just before the subprime debacle, Countrywide was one of the biggest players in the mortgage business. A man named Angelo Mozilo became chief executive. The company was on a roll. Its motto was "let's think outside the box." And it did.
Countrywide was the first to process applications by computer. Then it let the computer assign a credit score. Then, in a bizarre move, if the credit score was too low, Countrywide just tacked on a few more percentage points to the interest on the mortgage.
During the heyday of the subprime game, Countrywide got so busy that no one was looking at the applications, they just let the computer do it. And the money kept rolling in. When the subprime mess went belly up, Countrywide went bust and was bought by Bank of America Corp. (NYSE: BAC).
The fallout from Countrywide has prompted the SEC to conduct a long and thorough investigation of the goings on at Countrywide during this entire time. The commission has found primarily that Mr. Mozilo did not disclose the company's true financial condition. He simply left out pertinent information. The SEC's brief charges Mr. Mozilo with "omissions" of vital information. This is the first case to be litigated since the subprime debacle occurred.
Mr. Mozilo is also charged with insider trading for selling $140 million of Countrywide stock in 2006 and 2007. He has denied the charges.
The SEC seems to have adopted a new, aggressive stance. Let's hope it continues on this rigorous path.
Are there any other cases that should be investigated by the SEC?
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Reader Comments (Page 1 of 1)
6-05-2009 @ 5:54PM
Jamie Pitts said...
The SEC is right to investigate what this man knew about what he was doing, but the scary thing about this is that a lot of people were doing things that were ultimately part of the problem, without realizing it. Some were just following orders from their employer. Some prosecutors are going after the easy ones, the little guys who were too dumb to know they were getting in trouble, while the worst offenders, the Mozilo's and other CEO's, get away with being fired and keeping the millions!
6-06-2009 @ 7:13AM
Joseph Zernik said...
Countrywide Loan Records Are Alleged as Fraud
In Zernik v Melson et al (1:2009cv00805), filed May 1, 2009, in U.S. Court, Washington DC, Plaintiff claims that USDOJ and FBI tolerated for years racketeering by Countrywide (CFC), now a subsidiary of BAC. Moreover, fraud by Countrywide against the US Government, and even its estimated scope – hundreds of billions - were detailed already in complaints filed with FBI, Los Angeles, in early 2007. FBI and USDOJ to this date refuse to investigate such complaint, even while the announce in Washington DC their expedited investigation against sub-prime lenders. Therefore, the complaint alleges that FBI investigation of Countrywide is deliberately aimless. The complaint alleges that Angelo Mozilo – former President of Countrywide, and Sandor Samuels – former Chief Legal Counsel of Countrywide were directly involved in such frauds perpetrated in the LA Superior Court.
Listed below are key records of the alleged fraud by CFC/BOA in litigation of Samaan v Zernik (SC087400) at the LA Superior Court:
1) UNDERWRITING LETTER misrepresented as a fax transmission of mid-October 2004, from
Countrywide, San Rafael to Victor Parks, State of Washington. Fraud expert opinion letter confirmed the fraud.
2) REAL PROPERTY PURCHASE CONTRACT misrepresented as a fax transmission of October 25,
2004, 5:03pm from VICTOR PARKS, State of Washington, to Countrywide, San Rafael.
3) SET OF A LETTER AND DECLARATIONS by CFC/ MARIA MCLAURIN, Branch Manager, San
Rafael, California.
4) SUBPOENA PRODUCTION BY COUNTRYWIDE in Samaan v Zernik.
5) COURT RECORDS showing CFC and even more recently CFC/BOA appearing in court for almost
two years under the party designation of "NON-PARTY", while the court interchangeably designates it "DEFENDANT", "PLAINTIFF", "INTERVENOR", "CROSS-DEFENDANT", "REAL PARTY IN INTEREST", etc.
6) JULY 23, 2007 PROTECTIVE/GAG ORDER BY JUDGE JACQUELINE CONNOR
6-06-2009 @ 9:01AM
Donovan said...
All the banks had this high risk mortgage approval crap going on. They made billions of dollars on these mortgage deals.
The problem is these banks assumed they could write these high risk mortgages, close the deal, make the money, And sell the mortgage to another bank or investor, prior to the ARM adjusting higher, then what would be affordable for the buyer to be able to pay. All these banks were interested in was making money. The loan underwriters were fully aware of what borrowers were high risk, and most likely would eventually default, as their ARM and mortgage payments increased.
6-06-2009 @ 9:50AM
Donovan said...
Funny how our Government can and will seize an individuals property and assets, for back tax's, drug sales etc. Plus you go to jail or prison as well for these type of convictions.
However, Our Government allows CEO's and bank Execs to walk away scott free, and retain their billions worth of assets. Mansions, yachts, a few million in their bank accounts, and no jail or prison time. It seems our Government has a different set of laws, that apply to the very wealthy.