During the announcement last week concerning Bank of America’s eye-popping $16.9 billion settlement with the Department of Justice and several State Attorney Generals to resolve dozens of investigations, a new lead came out about where the DOJ may be looking next. Speculation has been renewed that the government will revisit it’s earlier criminal investigation of former Countrywide CEO Angelo Mozilo, the face of the housing bubble that crashed the U.S. financial sector in 2008.
According to NYTimes’ columnist Gretchen Morgenson, “The possibility of a new case against Mr. Mozilo came almost exactly seven years after the subprime mortgage machine he created and oversaw began to sputter and stall. That process began in earnest on Aug. 16, 2007, when the company disclosed that it was drawing down its entire $11.5 billion revolving credit line. Other lenders had lost confidence in its operations.”
“That was the beginning of the end for Countrywide. It was bought the next year by Bank of America in the single worst corporate acquisition ever. Bar none,” wrote Morgenson.
David Siegel of Irell & Manella in Los Angeles who represents Mr. Mozilo, said in a statement: “There is no sound or fair basis, in law or fact, to pursue any claim against Angelo Mozilo.” He added that Mozilo “stands virtually alone among banking and mortgage executives to actually have been pursued by this government before and already paid a record penalty.”
That penalty was to settle an insider trading case against Mr. Mozilo in 2009 brought on by the Securities and Exchange Commission. It accused Mr. Mozilo of generating personal profits of $140 million by selling Countrywide shares between November 2006 and October 2007, while he was on record privately disparaging the company’s products but defending them through public statements. Emails from that case showed Mr. Mozilo referring to the company’s loans as “toxic” and “poison.
The S.E.C. extracted $67.5 million in a settlement in that case, but at least a third of it was paid by others. Mr. Mozilo neither admitted nor denied the accusations.
It’s unknown whether the Mozilo an investigation continuation is in fact in the works or is merely speculation, since DOJ’s announcement did address their future plans. It is known that Mr. Mozilo is now 75 years old and reportedly being treated for cancer. The Justice Department strangely decided to end a criminal investigation case against the former Countrywide executive in 2011 after working the case for more than two years.
If you’ve any doubts about the need for a thorough look at the case against the most scandalized American banker in the aftermath of the financial crisis, read Morgenson’s brief description of his last couple of years at the helm of Countrywide. Or ask a Bank of America shareholder.