From the editor: Mozilo’s ban a true black mark
The lifetime ban against former Countrywide CEO Angelo Mozilo serving as an officer or director of a public company may be the most positive result to come from his settlement of a U.S. Securities and Exchange Commission complaint.
As reported over the weekend, the SEC settled with Mozilo and two top lieutenants in a case stemming from the near collapse of Calabasas-based Countrywide, once the nation’s largest residential home mortgage lender.
Mozillo and crew never admitted to defrauding the public but they did agree to a series of fines and bans — in Mozilo’s case, the penalty will be $67.5 million, including about $20 million to be paid by Bank of America, which acquired Countrywide as the nation’s housing meltdown was gathering full steam in the summer of 2007.
As we have seen in many cases of this type, money really isn’t a deterrent to bad behavior. The SEC’s ability to levy fines pales in comparison to the ability of people to reap ill-gotten gains. But a lifetime ban takes at least some of that livelihood away and it puts a permanent black mark on Mozilo’s legacy.
That legacy would have been far different if, in 2003 or 2004, Mozilo had instructed his troops to rein in their subprime mortgage operations and go back to what had made Countrywide successful: 30-year, fixed rate mortgages offered at relatively low cost and with a level of automation and customer service that was unparalleled.
But Mozilo, the company’s blunt-talking salesman-in-chief, wasn’t about to cede market share to upstarts like New Century. So Countrywide kept taking more and more risk while at the same time trying to look more like a bank.
The SEC argued that Mozilo knew he couldn’t outrun the tidal wave, so he accelerated his own stock sales, pocketing $140 million in gains.
The settlement means we’ll never hear the SEC’s case or Mozilo’s defense argued in court. But a lifetime ban means Mozilo’s time at the helm of any public company is over.
• Henry Dubroff is the editor and chairman of the Pacific Coast Business Times.