Los Angeles defense lawyer Jan Handzlik agreed, saying it was easier to prove greed and negligence against mortgage and Wall Street executives than criminal intent. He noted that federal prosecutors have convicted "some of the low-hanging fruit," such as mortgage brokers, appraisers, lending officers and individual borrowers — people who "directly defrauded a bank for personal gain."
Civil cases, such as those brought by the SEC, carry a lower burden of proof, noted Jacob S. Frenkel, a former SEC enforcement lawyer and white-collar fraud prosecutor. Criminal cases require a much higher burden — beyond a reasonable doubt — to win convictions, he said.
"It exposes the tension between the public clamoring for punishment after a major economic calamity and the reality that criminal cases are based on evidence, of which criminal intent is the fundamental piece," he said.
The criminal investigation came to light in mid-2008 as grand jury subpoenas were served to executives with Countrywide and two other failed lenders, New Century Financial Corp. of Irvine and IndyMac Bank of Pasadena. No criminal charges have been filed in any of those cases, and it was not known whether they are still active, although defense attorneys described New Century's as dormant.
Prosecutors were trying to determine whether fraud or other crimes contributed to the mortgage debacle. But they pointed out even then that such cases were complex, difficult to prove and likely to take years to develop.
In recent testimony before the Financial Crisis Inquiry Commission and in a civil lawsuit in Los Angeles County Superior Court, Mozilo defended Countrywide as an all-American success story.
In the court case, a wrongful-dismissal suit brought by a former executive, Mozilo said the goal for him and Countrywide's co-founder, the late David Loeb, was "changing the lives of the American people" by making home loans to customers who could not have qualified for them through other lenders.
"It was founded by two people driven ... to make a difference," Mozilo said.
Mozilo and Loeb founded Countrywide in 1969 as a Federal Housing Administration and Veterans Administration lender. The company became the largest supplier of loans to government-sponsored mortgage financing company Fannie Mae.
Cocky, flashy and always tan, Mozilo was the face of the mortgage industry to many Americans, chatting with CNBC anchor Maria Bartiromo even as competitors collapsed and reassuring analysts that his company would weather the storm and emerge stronger.
Mozilo still faces several civil suits, including actions filed by investors in Countrywide mortgage-backed securities.
On another front, a congressional committee has reopened an investigation of whether Countrywide's VIP lending program, nicknamed "Friends of Angelo," provided improper favors to legislators and their staffs, other public officials and business associates.
Rep. Darrell Issa (R-Vista), chairman of the House Oversight Committee, issued a subpoena to Bank of America for all materials related to the VIP program, saying he believed Countrywide "orchestrated a deliberate and calculated effort to use relationships with people in high places in order to manipulate public policy and further their bottom line."
scott.reckard@latimes.com
