US prepares to sue Countrywide’s Mozilo

Angelo Mozilo, chief executive officer of Countrywide Financial Corp.
Jay Mallin | Bloomberg | Getty Images
Angelo Mozilo, chief executive officer of Countrywide Financial Corp.

US prosecutors are preparing a civil lawsuit against Angelo Mozilo, co-founder of Countrywide Financial, in a final effort to target the figure most associated with the sub-prime mortgage boom which preceded the financial crisis.

The US attorney's office in Los Angeles is working on the case and plans charges against several other former Countrywide executives, according to a person familiar with the matter. The suit could be filed in the coming weeks.

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"We do not comment on rumors concerning any investigation. There is no sound basis, in law or fact,for the government to bring a claim against Mr Mozilo," said David Siegel, a lawyer for Mr Mozilo. He added that his client "stands virtually alone among banking and mortgage executives to actually have been pursued by this government and already paid a record penalty in settlement".

The pursuit of Mr Mozilo, first reported by Bloomberg News, comes as the Department of Justice is poised to announce a record $16-17 billion settlement with Bank of America over allegations it misled buyers of mortgage-backed securities that proved to be packaged with faulty loans.

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BofA acquired Countrywide in 2008 in a $4 billion deal that is widely considered to be one of the worst corporate acquisitions of all time, costing the bank billions of dollars in subsequent losses and litigation.

Famous for his permanent deep tan, Mr Mozilo, 75, built his company into the country's most prominent mortgage originator, selling it to BofA just as the scale of the crisis was becoming clear.

US attorneys are planning to use the Financial Institutions Reform, Recovery, and Enforcement Act, a two decades-old law, which makes it a civil crime to defraud a financial institution. Firrea has a 10-year statute of limitations, giving authorities more time than usual to go after crimes related to the financial crisis.

Mr Mozilo paid a record $67.5 million in 2010 to resolve claims from the Securities and Exchange Commission that he misled investors about the company's sub-prime mortgage exposure. He did not admit or deny the allegations. A criminal inquiry was dropped in 2011.

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At a congressional hearing in 2008, House Democrats reported that Mr Mozilo received nearly $250 million of compensation between 1998 and 2007. He told the same hearing: "I've spent my life trying to lower the barriers of entry for Americans to own homes."

He has repeatedly said it was the global credit crisis rather than alleged lax lending standards of his company that was responsible for the housing crash.