SEC sues ex-Countrywide CEO, 2 others for fraud

The Securities and Exchange Commission's civil lawsuit, filed in federal district court in Los Angeles, also accuses Mozilo of illegal insider trading.

Countrywide was a major player in the subprime mortgage market, the collapse of which in 2007 touched off the financial crisis that has gripped the US and global economies.

Mozilo, 70, is the most high-profile individual to face formal charges from the federal government in the aftermath of the crisis. He has denied any wrongdoing, and his attorney yesterday called the SEC's allegations "baseless."

Civil fraud charges also were filed against Countrywide's former chief operating officer David Sambol, 49, and former chief financial officer Eric Sieracki, 52.

The trio "deliberately misled" Countrywide shareholders, SEC enforcement director Robert Khuzami said at a news conference at agency headquarters. While they painted a picture of robust performance, the real Countrywide was "buckling under the weight" of soured mortgage loans, he added.

Mozilo "was actively taking his own chips off the table" by selling his shares to reap nearly $140 million in illicit profits, Khuzami said.

The SEC is seeking injunctions and unspecified civil fines against Mozilo, Sambol, and Sieracki and wants them to be barred from serving as officers or directors of any public company. The agency also is seeking unspecified restitution of allegedly ill-gotten profits from Mozilo and Sambol.

Mozilo's lawyer, David Siegel, said the stock sales "complied with applicable laws and regulations, and were made under the terms of a series of written sales plans which were reviewed and approved by responsible professionals."

"All of the SEC's allegations will be answered completely in court and disproved with the full facts and evidence," Siegel said in a statement.

Lawyers for Sambol and Sieracki also said their clients will fight the charges.

"Making groundless allegations and losing in court will not help the SEC restore its reputation," said Sambol's lawyer, Walter Brown.

Shirli Fabbri Weiss, Sieracki's lawyer, said her client bought Countrywide stock during the time when the SEC alleges that he was withholding information from investors, and "lost money just like all other investors in Countrywide stock."

The SEC and federal prosecutors have undertaken wide-ranging investigations of companies across the financial services industry, touching on mortgage lenders, the Wall Street investment banks that bundled home mortgages into securities sold to investors, and other market players.

"We are very closely looking at a number of cases," Khuzami said.

The SEC's scrutiny of Mozilo's stock sales began in the fall of 2007 with an informal inquiry.

The filing of the agency's lawsuit is a striking turn for Mozilo, the man who 40 years ago cofounded what grew into the nation's largest mortgage lender. He moved the company in 1969 from New York to the housing hotbed of suburban Los Angeles, guiding Countrywide through numerous boom-and-bust housing cycles.

After the mortgage crisis hit, Calabasas, Calif.-based Countrywide was forced to cut thousands of jobs and saw its shares plummet. Its downward spiral ended in it being bought by Bank of America Corp. in July 2008 for about $2.5 billion. Countrywide itself is the target of multiple lawsuits related to the mortgage meltdown.