The head of the biggest mortgage lender in the US lied about how much risk his firm was taking on, claims the SEC
Angelo Mozilo, who ran the biggest mortgage lender in the US, has been charged with securities fraud and insider trading.
US regulators claimed that Mozilo. CEO of Countrywide Financial, and two other former executives, deliberately misled investors about the financial risks they were taking on.
Mozilo was also accused of insider trading for selling his Countrywide stock for nearly $140m in profits based on non-public information.
The Securities and Exchange Commission (SEC) accused Mozilo along with former chief operating officer, David Sambol, and former chief financial officer, Eric Sieracki, of deliberately misleading the market by assuring investors that Countrywide only lent to prime quality borrowers.
“Angelo Mozilo knew that Countrywide was gambling with increasingly risky mortgages and he kept those details from investors.
Rosalind Tyson, director of the SEC's Los Angeles Regional Office
In fact, the SEC claimed that from 2005 to 2007 Countrywide aggressively expanded lending to risky subprime borrowers, despite being warned against it. Under financial rules the mortgage lender was required to disclose who it was lending to—but it did not do so.
Robert Khuzami, director of the SEC's Division of Enforcement, said: ‘Angelo Mozilo privately described one Countrywide product as 'toxic,' and said another's performance was so uncertain that Countrywide was 'flying blind.'"
Rosalind Tyson, director of the SEC's Los Angeles Regional Office, added: ‘[Angelo Mozilo] knew that Countrywide was gambling with increasingly risky mortgages and he kept those details from investors while he was actively taking his own chips off the table.’