The Continuing Fall of Countrywide’s Angelo Mozilo
Staff at the Securities and Exchange Commission are recommending that civil securities fraud charges be filed against Angelo Mozilo, the once high-flying head of subprime lender Countywide Financial. The news was first reported by The Wall Street Journal, which explained that Mozilo has been sent a Wells notice, a document alerting its recipient that he will likely face SEC charges.
**The Journal, citing unnamed sources, said those charges could include alleged violations of insider-trading laws as well as failing to disclose material information to shareholders.
In the vast, vast majority of these cases, the recipient of a Wells Notice agrees to settle the charges, pay a fine (almost always a small fraction of the defendant’s net worth), and be barred from serving as an officer or director of a public company for a period of time. Given that Mozilo was born in 1938 and is the poster child for bad corporate governance and slimy lending practices, there’s probably no risk he’ll be hired to run another company again anytime soon (except maybe General Motors (GM), which apparently has no standards for hiring executives).
Still, symbolism serves a purpose:
Sure, a couple Bear Stearns hedge funds managers got in trouble but so far, the titans have been free to juggle assets and wait for the wheels of justice to grind. Hopefully Mozilo is the beginning of an avalanche of similar Wells Notices.
If so, that should make some of those high-profile Friends of Angelo slightly nervous — including Sen. Chris Dodd (D-Conn.). Dodd is among an exclusive group of powerful people who reportedly enjoyed favorable terms on their mortgages from Countrywide, due to their prominent positions and connections with Mozilo. Getting that break on points and fees doesn’t look so smart these days, when the founder of the firm that awarded them could face insider trading charges.