Former Countrywide Financial Corp. boss Angelo R. Mozilo, whose embrace of exotic loans helped fuel the mortgage boom and meltdown, will face Securities and Exchange Commission fraud charges unless his lawyers prevail in an eleventh-hour appeal, people familiar with the SEC's investigation said Wednesday.
Mozilo is among several former executives of the Calabasas company whom the SEC staff wants to charge in a civil case, one of these people said. He would face accusations of insider trading and failing to disclose to shareholders the risks the company was running unless the SEC's five commissioners overturn their investigators' recommendation.
Mozilo made Countrywide the No. 1 home lender by pursuing all segments of the mortgage business, only to become a lightning rod for critics, not least because of his outsized compensation. His stepped-up sales of millions of Countrywide shares as the subprime lending frenzy peaked and the stock's price tumbled are one of the areas the SEC has scrutinized, one of the people familiar with the probe said.
His attorney, David Siegel of Irell & Manella, defended the stock sales as "properly prepared and approved."
"We do not believe there is any fair basis for allegations to be made against Mr. Mozilo," Siegel said in a statement issued late Wednesday.
An SEC lawsuit would pit the federal government against the most visible symbol of the aggressive lending that put millions of Americans in unaffordable loans -- an executive who appeared to cash out just before the crash.
Countrywide "had a very clear strategy of churning through mortgages to sell the most esoteric kind of products it could," said Richard Ferlauto, director of corporate governance at the American Federation of State, County and Municipal Employees.
"It was only by the most optimistic and some would say more-than-optimistic projections" that such lending was justified, Ferlauto said. "And Angelo Mozilo understood this and took the money and ran."
The SEC cannot put Mozilo in jail, but a separate federal criminal probe of Countrywide, begun last year, is continuing, one of the people familiar with the SEC case said.
Mozilo, 70, a golfing enthusiast who lives in one of a small cluster of large homes surrounded by the fairways and greens of the Sherwood Country Club in Ventura County, co-founded Countrywide in 1969.
Last year, battered by loan losses, the company sold itself at a fraction of its former market value to Bank of America Corp.
