Schadenfreude: Finally, Countrywide's CEO Getting What He Deserves 31 comments
Tim Iacono
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The doo-doo is getting deeper for the Orange Man, Countrywide Financial (once CFC, now part of BAC) founder and former CEO Angelo Mozilo, who, yesterday, was on the receiving end of insider trading and securities fraud charges from the Securities and Exchange Commission.
What becomes of this all may be somewhat anticlimactic as both parties - the SEC and Mozlio - have tattered reputations, sorely in need of rebuilding, though only one stands a chance of serving time for their previous misdeeds.
A search here at this blog results in a veritable treasure trove of Tangelo-related goodies going all the way back to 2005 when the housing boom and Countrywide's stock price were near their peaks.
Interestingly, the title "It just looks bad!" was used twice for Tangelo, once on the subject of his late-2007 stock sales (which the SEC is, for understandable reasons, now keenly interested in) and again for an early-2008 Colorado bankers' ski trip. The day after Countrywide Financial Corp. Chief Executive Officer Angelo Mozilo arranged to start $139 million in stock sales, he told two top deputies there was “no way” to value one of its most popular mortgages.
Ahhh... memories...
Long one to point fingers at others, citing falling home prices (yes, really), rabid speculators, and low interest rates from the Federal Reserve as the root causes of the nation's housing market ills, fingers are now pointed squarely in his direction as incriminating emails have now surfaced.
This report in Bloomberg provides the details:
Here's a graphic from that late-2007 reference above detailing the many stock sales as the housing bubble was rapidly losing air (recall that there was a short pause when the credit crisis first began in earnest back in August of 2007).
“We are flying blind on how these loans will perform in a stressed environment of higher unemployment, reduced values and slowing home sales,” he wrote in a 2006 e-mail released yesterday by the Securities and Exchange Commission. “We have no way, with any reasonable certainty, to assess the real risk of holding these loans on our balance sheet.”
...
While Mozilo acknowledged in e-mails the risks associated with Countrywide’s loans and the company’s need to sell the option-ARM portfolio, he was simultaneously arranging to dump his own holdings, according to the SEC’s complaint.
In the final months of 2006 he began establishing four sale plans “while in possession of material, non-public information concerning Countrywide’s increasing credit risk,” the SEC said. From those plans, he exercised over 5.1 million stock options and sold the underlying shares for total proceeds of almost $139 million.
The SEC authorized such plans in 2000 to let executives sell shares without the appearance of tapping current information on their companies. Still, the SEC may make its case against Mozilo, if it can show he had significant information that the market lacked when he arranged his sales, said Robert Hillman, a securities law professor at the University of California, Davis.
And, of course, there's this classic interview with CNBC's Money Honey Maria Bartiromo during the summer of that same year.
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This article has 31 comments:
1) Because they thought it was a great opportunity (a mortgage originator)?
2) To avoid the embarrassment of a bankruptcy since BAC held a lot of CFC debt?
Other explanations are welcomed.
Like Senator Chris Dodd of Conneticutt who got favorable mortgage terms on his second house through Angelo, which looks more like payment for political patronage.
Chris Dodd is going to lose his senate seat.
Waytogo Ang
"a home for every family"
Community Reinvestment Act...
The FBI is currently investigating possible illegal insider trading by two Securities and Exchange Commission enforcement attorneys.
Humorous
On Jun 05 03:44 PM User 283977 wrote:
> 3) BAC was told if they bought it the government would bail them
> out.
But again the emphasis seems to be on safety and p/r potential - Mozilo is preternaturally tanned, known everywhere, good for headlines. Given the abundant evidence available on the quality of the mortgage underwriting, the case is not demanding from an investigative point of view. And Mozilo is unpopular and not a factor on Wall Street.
In order to demonstrate that it is relevant and able to reinvent itself as a law enforcement agency, the SEC will have to do better than this. Let's have someone from Wall Street, a hedge fund manager or an investment banker, a mover and a shaker, something about fraud, abuse and manipulation in CDS or naked shorting.
"This entire episode in being driven by form not substance".
Wow, I mean how funny is that when in fact, it was the substance that drove everything into the ground in the end.
I watched the video, more out of curiosity, and to see almost all of the things Angelo say go wrong in the end was outright hilarious.
This guy was truly dead wrong on every single issue he addressed.
Either this guy was truly an idiot and was so busy counting his money that he forgot he had a business to run, OR he is truly a criminal who outright lied to many people, for quite along time and should be in jail this second.
Lee Mozilo will certainly lose his healthy tan while he is rotting away in jail.
I wish the government would charge more of these reckless financial executives with criminal charges. Lee Mozilo isn't the only one to admit that many of the loans were risky, that he was over leveraged and taking on way too much risk. Other execs have admitted that they knew they were "picking up pennies in front of a steam roller. These guys knew they had high leverage, why else did they use "off balance sheet vehicles" as a way to hide true risk and high leverage from investors?
Off balance sheet items should be outlawed, and should be rolled into a companies main balance sheet immediately. Once transparency is achieved, the investor will see that If the investor still invests, it's his fault.
Shame on you Mozilo and shame on the SEC for being asleep at the wheel! What good are regulators if they don't do their job?
as for why BAC bought CFC, how about ignorance? betting the farm by taking on two major acquisitions in the midst of a financial meltdown qualifies as ignorant, i believe.
I'd like to see this guy with skin as white as the color of snow,
Hey Angelo, an hour in the courtyard will make it difficult to maintain your tan!
On Jun 05 03:01 PM Egg wrote:
> Until he (and the rest) are in Guatanamo, I will not be satisfied.
Ayn Rand and Adam Smith told me markets were infallible, self correcting, omniscient. Angelo Mozilo was just acting in his own interest. If everyone did likewise, we'd all be better off, right? I think we've all learned a valuable Libertarian lesson from this great american.
I think he at best is 4th in line. He is the private guy so subject to prosecution, the fall guy.
first we have the cowboy from calgary (oops, jackson MS), then ken lay, then...
> jack
But he knows to sell his own holdings.
Check out what is being said and and the motion of Mozilo's hand in that video at the 7:22 mark on the embedded video above.
not sure why BAC bought CFC. it didn't look like a good buy back then and still doesnt
I also love how he blamed the big bad regulator for placing a cap on fannie mae activity, nevermind that fannies poor accounting practices and purchase of subprime mortgages from countrywide ultimately required fannie bailout with taxpayer money.
I hope Mozilo gets the chair. I really truly do.
Yoda,
You're of course right that it "was not his job to stop the economy from imploding". However, as the CEO of a publicly traded company it WAS his job not to trade on information uniquely available to him.
And it was equally his job NOT to publicly tout his company while at the exact same time selling holdings in it.
The Jedi understands not the rules of logic.
On Jun 05 03:51 PM Fighting Yoda wrote:
> The regulators and the Fed are lot more to be blamed. Mozillo is
> a private entrepreneur trying to maximize profits, he also is not
> an economist or a regulator- it was not his job to stop the economy
> from imploding.
On Jun 05 05:05 PM Living4Dividends wrote:
> Off balance sheet items should be outlawed, and should be rolled
> into a companies main balance sheet immediately. Once transparency
> is achieved, the investor will see that If the investor still invests,
> it's his fault.
Grab one miscreant, string him up in public and everyone forgets that there are a thousand others, but they don't need to be prosecuted, because the public is happy with one or two scapegoats. The scapegoats are the ones that weren't educated at an Ivy League school, the Kozloswkis, Ebbers (Canadian) and Mozilos (Skilling was the exception, because he challenged the system.)
The problem is endemic and driven by stock options, but so much of stock option gains find their way back to the lobbyists and ultimately into the pockets of Congress, so no major reforms will be done. The strategy is simple: Just throw a few bodies at the public and they are as happy as a dog with a bone.
Don’t get conned by the SEC’s grandstanding. We want 50 indictments and then we’ll be satisfied. Until then we need to throw every incumbent out of office, regardless of party affiliation. Also, don't invest in companies that use stock options (warrants is the correct term) unless on a very small scale.