Angelo Mozilo and two other former executives have agreed to pay tens of millions of dollars to avoid a trial on civil fraud and insider trading charges. Mozilo and the others were to face trial on the Securities and Exchange Commission's charges next week.
Countrywide Financial Corp. co-founder Angelo Mozilo and two other former executives have agreed to pay tens of millions of dollars to avoid a trial on civil fraud and insider trading charges, a federal judge said in court Friday.
Mozilo and the others were to face trial on the Securities and Exchange Commission's charges next week.
Mozilo agreed to repay $45 million in ill-gotten profits and $22.5 million in civil penalties. Former Countrywide President David Sambol will repay $5 million in profits and pay $520,000 in civil penalties, and former Chief Financial Officer Eric P. Sieracki will pay $130,000 in civil penalties.
Sambol's attorney Walter Brown said in a statement after the hearing that Bank of America Corp., which bought Countrywide in July 2008, would pay his client's $5 million in ill-gotten profits.
The payment comes on top of $600 million that Bank of America agreed to pay in August to end a class-action case filed by former shareholders against Countrywide.
Mozilo lawyer David Siegel did not return a message asking whether the former countrywide chairman's $45 million forfeiture would also be paid by the bank.
Messages left with Charlotte, N.C.-based Bank of America were not immediately returned.
As part of the settlement, Mozilo agreed he will never again serve as an officer or director of a public company.
John Coffee, a professor at Columbia Law School who specializes in securities law, says the SEC has been an aggressive enforcer in this case.
"They've negotiated a settlement, which for an individual defendant is near a record penalty," he said.
Under the settlement, the three men did not admit wrongdoing.
"Mr. Sambol has agreed to settle the SEC lawsuit and put the matter behind him for the benefit of his family and loved ones," Brown said in the statement.
Sieracki's lawyer, Shirli Fabbri Weiss, said in a news release that all fraud-based claims against her client had been dropped and that his civil penalty was to settle fraud-based charges.
An SEC spokesman did not return a phone message.
The SEC accused the men of misleading shareholders about the quality of the loans on Countrywide's books. The civil complaint also accused Mozilo of acting on his inside knowledge of the company's precarious state when he sold shares between November 2006 and October 2007 ahead of its collapse, reaping more than $139 million.
Mozilo was not in court when the settlement was announced.
The former Countrywide chairman is the nation's highest-profile defendant yet to face trial for risky business practices leading to the housing collapse that sent the country into recession.
In addition to the civil case, Mozillo faces a criminal investigation. It's unclear whether that case will ever result in charges, but Coffee says that had to help motivate Mozilo's attorneys to settle.
"You can delay things up to the last minute but eventually, on the steps of the courthouse, you've got to make a decision whether to try the case or settle and I think he made the only rational decision for a potential criminal defendant in his position," Coffee said.
In legal filings, regulators portrayed the three defendants as engaging in a single-minded pursuit of market dominance, even if it meant knowingly taking disastrous risks.
The company was a major player in the market for high-risk subprime mortgages and became the biggest U.S. mortgage lender overall before it spiraled into disaster when the mortgage meltdown hit.
The settlement talks involving Mozilo were disclosed after U.S. District Judge John F. Walter filed a notice Thursday for trial lawyers to attend a status conference Friday.
Countrywide's lending practices are reportedly also the subject of a criminal probe in Los Angeles. Thom Mrozek, a spokesman for the U.S. attorney's office, declined to comment about the situation.
Countrywide was based in Calabasas, Calif.
NPR's Tamara Keith and The Associated Press contributed to this report
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