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.
The lawsuit claims the retirement plan lost hundreds of millions of dollars. It seeks unspecified compensatory damages and the appointment of an independent trustee to manage the plan.
Employees decided how much of their salary to set aside in their retirement plan based largely on their understanding of the company's financial picture, Berman said.
The plan held around $349.9 million in Countrywide stock as of Dec. 31, according to a company filing with the Securities and Exchange Commission cited in the lawsuit.
The holdings amounted to about 33% of the plan's total assets, the lawsuit said.