Countrywide Financial Corp. co-founder Angelo Mozilo has agreed to a $67.5 million settlement to avoid going to trial on civil fraud and insider trading charges. He had been accused of profiting while doling out risky mortgages and misleading investors about the risks. Two other former Countrywide executives also settled before trial on charges filed by the Securities and Exchange Commission. Interestingly, employment agreements that protect the men from lawsuits involving the failed lender mean Bank of America Corp., which bought Countrywide in July 2008, will actually pay most of the settlement. The settlement will allow the executives to avoid the risk of a guilty verdict that could have been used against them in lawsuits by shareholders. It may well also help them if prosecutors decide to go forward with a criminal probe into their activities. However, it’s doubtful this will happen.
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 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. Under the settlement, Mozilo agreed to never again serve as an officer or director of a publicly traded company. Sambol agreed not to do so for three years.
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