Jurors in the fraud trial of former Countrywide Financial Corp. executives will be allowed to see e-mails and a handwritten note from the lender's former chief financial officer, who said he feared becoming a "magnet [for] prosecution" and told his father, "I can lose my net worth or go to jail for things I don't even know," a judge ruled Friday.
The documents "go to the heart of the issues in this case" by shedding light on the thinking of former CFO Eric P. Sieracki, U.S. District Judge John J. Walter said in making his decision.
He turned aside a motion by Sieracki's lawyer, Shirli Weiss of San Diego, to exclude at least part of the communications.
Weiss said that such phrases, pulled out of context, would unfairly inflame the jury that is to be selected later this month in the Securities and Exchange Commission's fraud case against Sieracki and two other executives, former Chairman Angelo R. Mozilo and former President David Sambol.
A Times story this week that examined the e-mails and notes was "prejudicial and sensational," Weiss told the judge. She said the article "tried to do what this motion was designed to protect."
Walter, working with lawyers for both sides to shape how the trial will unfold, said he would rule in writing this weekend on several motions to exclude evidence filed by Mozilo and the SEC.
The three defendants are accused of misleading investors by portraying Countrywide, once the nation's largest home lender, as a prudent company in the years 2005 through 2007. The company was skidding toward bankruptcy when it was acquired in 2008 by Bank of America Corp.
The SEC contends that Countrywide had become the most aggressive mortgage lender of all by adopting every risky element of its rivals' loans and then making numerous "exception" mortgages that fell outside the already loosened guidelines. Mozilo also is accused of insider trading.
The SEC does not allege that Countrywide's filings contained inaccurate information but that they omitted negative facts that investors had the right to know, particularly in its regular quarterly and annual financial reports. The agency is seeking to bar the three executives from serving as officers or directors of public companies and to recover stock-sale profits of $142 million from Mozilo and $18 million from Sambol.
Defense attorneys argue that through various other SEC filings, calls with securities analysts and investor forums the former executives adequately disclosed the type of loans that Countrywide was making and the delinquencies that were mounting during the period in question. The defense contends that the three never intended to deceive investors.
Sieracki contends he was parroting a joking pet phrase of Mozilo's when he mentioned "lose my net worth or go to jail" in two e-mails to his father in spring 2006, when the company's stock was riding high.
He says the note containing "magnet 4 prosecution," written after the stock had plummeted in late 2007, was a tongue-in-cheek use of black humor to release tension after working 47 days out of 48.
In his second e-mail to his father, Sieracki wrote: "It's tempting to think about bailing based on the stock price, but I think I need to persevere and stick it out as long as I can. They're finally forced to pay me good money and I will try to ride that train as long as I can."
Walter said that section of the e-mail could be used by the SEC to show that Sieracki was motivated by money. The e-mail contained a reference to another high-profile financial fraud case.
"Guilty verdicts were handed down on Enron today," Sieracki said in the May 26, 2006, e-mail.