The Securities and Exchange Commission, aka the SEC, is supposed to be the government’s watchdog in the war against insider trading, executives feathering their own nests at the expense of shareholders, and other forms of corporate corruption.
Yet many observers would say the SEC has been asleep at the wheel since at least 2000, when subprime lenders sprang up like mushrooms in a bog. When the Attorneys General of several states started investigating lenders such as Countrywide and WaMu for everything from mortgage fraud to appraisal fraud, the SEC still didn’t bat an eye. And the backs of members of Congress were too weighted down with campaign contributions from the banking industry for them to either see or care the inevitable and certainly forseeable outcome to the U.S. and world economies from the insatiable greed of that industry.
The political winds are changing: SEC staff are now recommending that Countrywide founder and former CEO Angelo Mozilo, arch-symbol of the subprime run-up and meltdown, be charged with fraud, insider trading and failing to disclose to Countrywide shareholders the risks the company was taking. Mozilo was sent a Wells letter last week informing him of the likely charges. Wells letters are sent by the SEC and unless the SEC’s 5-member commission overturns the recommendations of the staff, Mozilo will likely face the civil charges.
Mozilo is also the target of separate criminal investigations by the federal government. Besides the investigations by the Attorneys General in four states (California (AG Jerry Brown), Illinois (AG Lisa Madigan), New York (AG Andrew Cuomo) and Florida), Mozilo is facing numerous class action suits from unhappy shareholders and loan borrowers who claim they were misled as to the terms of their loans.
According to a recent article in the Wall Street Journal, Mozilo modified his executive plan with Countrwide in 2006 and increased the sales of his stock from $60 million in 2006 to $130 million in 2007. His attorney, David Siegel of Irell & Manella, denies that Mozilo bears any responsibility for the types of loans his client marketed, and that the stock sales were proper.
This article is also published in Examiner.com.
Sell also the Los Angeles Times and the Wall Street Journal.