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Mozilo will pay $67.5 million to settle fraud case

By   /   Friday, October 15th, 2010  /   Comments Off on Mozilo will pay $67.5 million to settle fraud case

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Angelo Mozilo, the founder and former CEO of Countrywide Financial, will pay $67.5 million to settle civil charges brought by the U.S. Securities and Exchange Commission, the largest such settlement in SEC history, the agency said.

In a settlement approved in federal court on Oct. 15, Mozilo agreed to pay $22.5 million in penalties and another $45 million in disgorgement of what the SEC called “ill-gotten gains.” He and two other former Countrywide executives were accused of violating SEC disclosure requirements and misleading investors as the subprime mortgage crisis emerged. Mozilo was also accused of insider trading.

Mozilo’s settlement also bars him from ever again serving as an officer or director of a publicly traded company.

Countrywide was based in Calabasas and had major operations in Simi Valley and Thousand Oaks. It was acquired by Bank of America in 2008 and now operates as Bank of America Home Loans.

In addition to Mozilo, the SEC reached settlement agreements with former Countrywide Chief Operating Officer David Sambol and former Chief Financial Officer Eric Sieracki. Sambol will pay $5 million in disgorgement and a $520,000 penalty, and Sieracki will pay a $130,000 penalty.

All penalties and disgorgement payments will be paid to Countrywide investors who were harmed, the SEC said in a news release.

In the settlement, the three executives neither admit nor deny the SEC’s allegations. But SEC officials called the agreement a clear sign that investors were wronged by Countrywide management.

“Mozilo’s record penalty is the fitting outcome for a corporate executive who deliberately disregarded his duties to investors by concealing what he saw from inside the executive suite — a looming disaster in which Countrywide was buckling under the weight of increasing risky mortgage underwriting, mounting defaults and delinquencies, and a deteriorating business model,” Robert Khuzami, director of the SEC’s Division of Enforcement, said in a news release.

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