Feds Hammer Countrywide's Mozilo, Two Top Deputies In Securities Fraud Civil Suit; Allegedly Hid Firm's Crumbling Finances During Subprime Meltdown

In Los Angeles, California, Bloomberg News reports:

• Former Countrywide Financial Corp. Chief Executive Officer Angelo Mozilo and two of his top deputies were sued by regulators for allegedly hiding the home lender’s deteriorating finances as the subprime mortgage crisis unfolded.

• While publicly reassuring investors about the quality of his loans, Mozilo issued “dire” internal warnings and engaged in insider trading accelerating stock sales to reap about $140 million, the agency said in the suit at Los Angeles federal court.

• In one e-mail, he described a “particularly profitable subprime product as ‘toxic.’” He also wrote that Countrywide was “flying blind” and had “no way” to determine the risks of some adjustable-rate mortgages, the SEC said.

• “Each of the defendants was aware, but failed to disclose, that Countrywide’s current business model was unsustainable,” the agency wrote in the suit, which also named former Chief Operating Officer David Sambol, 49, and former Chief Financial Officer Eric Sieracki, 52. All three defendants denied the agency’s claims.

For more, see Countrywide’s Mozilo Saw Loans as ‘Toxic,’ SEC Claims.

For more from the U.S. Securities & Exchange Commission on this story:

• Press release: SEC Charges Former Countrywide Executives With Fraud (Former CEO Angelo Mozilo Additionally Charged With Insider Trading),
• Excerpts of E-Mails From Angelo Mozilo,
• Lawsuit: SEC v. Mozilo, et al. (C.D. Cal., Civil Action No. CV 09-03994 (VBF)).