Ex-Countrywide CEO Mozilo Settles SEC Charges for $22.5 Million

The charges were filed on June 4, 2009, and alleged, according to the SEC’s website, that the three “failed to disclose to investors the significant credit risk that Countrywide was taking on as a result of its efforts to build and maintain market share.” Countrywide was alleged to have known that the loans it was writing were problematic and that the loans it sold as mortgage-backed securities were on the road to default. The SEC also alleged that Mozilo “engaged in insider trading in the securities of Countrywide by establishing four 10b5-1 sales plans in October, November and December 2006 while he was aware of material, non-public information concerning Countrywide’s increasing credit risk and the risk regarding the poor expected performance of Countrywide-originated loans.”

Robert Khuzami, director of the SEC's Division of Enforcement, said in a statement, “Mozilo’s record penalty is the fitting outcome for a corporate executive who deliberately disregarded his duties to investors by concealing what he saw from inside the executive suite—a looming disaster in which Countrywide was buckling under the weight of increasing risky mortgage underwriting, mounting defaults and delinquencies, and a deteriorating business model.”

While the penalties sound severe, Mozilo and his two associates avoided going to trial by agreeing to the settlements, and, according to a report in TheLos Angeles Times, Mozilo’s will be paid by Bank of America, which bought Countrywide in 2008, and by Countrywide’s insurers, “under terms of Mozilo's employment contract.”