A lawsuit filed against Countrywide Financial Corp. on behalf of its employees claims the mortgage lender failed to warn its employees about the depth of its financial troubles, resulting in heavy stock losses in their 401(k) retirement accounts.
The lawsuit, filed Tuesday in U.S. District Court in Santa Ana, seeks class-action status and names as defendants Countrywide Chief Executive Angelo R. Mozilo and benefits committee members in charge of the retirement plan.
Calabasas-based Countrywide has struggled as the housing slump led to a sharp rise in mortgage defaults and foreclosures, particularly among sub-prime borrowers or those with weak credit. The lawsuit claims that plan managers "continued to offer Countrywide stock as an investment option and match in Countrywide stock when the stock no longer was a prudent investment for participants' retirement savings."
"We believe that they knew that it became . . . a risky investment," attorney Steve Berman, who is representing plaintiffs, said Wednesday.