CEO sold as stock dropped - Countrywide's Mozilo made changes to trading plan that raise red flags, experts say. Firm says sales followed policy.

Company executives say Mozilo did nothing wrong and that the transactions were made under trading plans that specified how many shares would be sold each month.

Similar trading plans have been used by hundreds of executives since they were greenlighted by federal regulators in 2000 as a means of fending off accusations of insider trading.

But most executives adopt a plan and stick with it, compensation and securities experts say. Mozilo didn't.

Instead, he shifted course twice in late 2006 and early 2007, according to regulatory filings, amid mounting signs of trouble in the housing and mortgage industries. Mozilo adopted a new trading plan, added a second and then revised it, allowing him to unload hundreds of thousands of additional shares before Countrywide stock went into a tailspin.

"There is clearly no legal prohibition of altering your plan," said David Priebe, a Bay Area attorney who has helped set up more than 50 of such plans for executives. "But the more that you modify or add to your plan over a short period of time, the more risk that someone will call it into question. I would not say that you cannot do it. I would say there is a risk if you do do it."

Mozilo, 68, and other company executives are already the targets of shareholder suits that claim they misled investors about Countrywide's financial condition. Hurt by rising loan defaults and the housing slump, the Calabasas-based company recently announced that it would lay off 12,000 of its 54,000 workers. Its stock closed Friday at $19.01, down from $45.03 on Feb. 2.

Sandy Samuels, Countrywide's chief legal officer, said Mozilo's stock sales were all "in accordance with company policy."

"The [trading] plans were put into place in consultation with Mr. Mozilo's financial advisor, without regard to any non-public or market information," Samuels said in a prepared statement.

Compensation experts who reviewed Mozilo's trading activity, however, said the changes he made could prove to be a liability as Mozilo and Countrywide defend themselves against shareholder suits.