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Nye Lavalle
Countrywide and the "left-wing anti-business press"

Angelo Mozilo's executive compensation package is the gift that keeps on giving. This is especially true for the "left-wing anti-business press" whose goal in life is to destroy the profitability of fine, upstanding public companies like Countrywide.

Mozilo, you will recall, is the Countrywide CEO who raked in $120 million in compensation while driving his company into a ditch. Along with other high-flying stars of the business world, such as former Citigroup CEO Charles Prince and former Merrill Lynch CEO Stanley O'Neal, Mozilo has been a target of an investigation into exorbitant executive compensation led by California Rep. Henry Waxman.

Muckraked, a blog run by former Wall Street Journal editor Marcus Baram, got its hands on a 23-page memo summarizing the findings to date by Waxman, one day before a congressional hearing in which Mozilo, O'Neal and Prince are expected to testify. For those who might be interested in exactly how state-of-the-art executive compensation packages are put together these days, the document provides a wealth of fascinating detail.

But Muckraked plucks out one particularly juicy nugget that bears repeated highlighting. It is part of an e-mail in which Mozilo responds to an executive compensation consultant who was working for Mozilo, but was disappointed in the terms of the agreement ultimately decided upon, because, sadly, they limited Mozilo's "maximum opportunity."

Mozilo writes:

I appreciate your input but at this stage in my life at Countrywide this process is no longer about money but more about respect and acknowledgement of my accomplishments. ... Boards have been placed under enormous pressure by the left wing anti business press and the envious leaders of unions and other so called "CEO Comp Watchers" and therefore Boards are being forced to protect themselves irrespective of the potential negative long term impact on public companies. I strongly believe that a decade from now there will be a recognition that entrepreneurship has been driven out of the public sector resulting in underperforming companies and a willingness on the part of Boards to pay for performance.

That e-mail was written on Oct. 20, 2006, well before the astonishing decline and fall of Countrywide was apparent to anyone outside of the company. Back then, perhaps Mozilo had some reason to consider himself a titan of industry attacked by annoying communist termites intent on destroying the American way of option-ARM, no-money-down mortgage life. But today, as the United States continues to experience record numbers of home foreclosures, in part because of the eagerness of companies like Countrywide to lure home buyers into mortgages that they couldn't afford, Mozilo's petulance doesn't come off too well. How the World Works strongly believes that a decade from now, Angelo Mozilo will be remembered as a pathetic icon of his time -- a man who "earned" hundreds of millions of dollars while incompetently managing a public company that was once the largest mortgage lender in the United States, but now is just a footnote to the greatest housing bust since the Great Depression.

We leave the final words to the Waxman memo:

While Countrywide, Merrill Lynch, and Citigroup prospered, Mr. Mozilo, Mr. O'Neal, and Mr. Prince received lucrative pay packages. During the five-year period from January 2002 through December 2006, the stock of Countrywide, Merrill Lynch, and Citigroup appreciated, and the three CEOs collectively received more than $460 million in compensation

Any alignment between the compensation of the CEOs and their shareholders' interests appears to breakdown in 2007, however. Despite steep declines in the performance and stock price of the three companies resulting from the mortgage crisis, Mr. Mozilo, Mr. O'Neal, and Mr. Prince continued to be well rewarded: Mr. Mozilo received over $120 million in compensation and sales of Countrywide stock; Mr. O'Neal was allowed to leave Merrill Lynch with a $161 million retirement package; and Mr. Prince was awarded a $10 million bonus, $28 million in unvested stock and options, and $1.5 million in annual perquisites upon his departure from Citigroup.

"Collectively, the companies run by Mr. Mozilo, Mr. O'Neal, and Mr. Prince lost more than $20 billion in the last two quarters of 2007 alone as a result of investments in subprime and other risky mortgages."

http://www.salon.com/tech/htww/2008/03/06/angelo_mozilo_gets_annoyed/index.html

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COMPENSATION

Mozilo defends cashing in Countrywide stock

Angelo Mozilo
Mark Wilson / Getty Images
Angelo Mozilo, founder and chief executive of Countrywide Financial, is sworn today during a House Oversight and Government Reform Committee hearing on executive pay.
The unloading of $141 million in options was in preparation for retirement, the Countrywide founder asserts, denying that he was trying to shield himself from the sub-prime meltdown.
By Jonathan Peterson, Los Angeles Times Staff Writer
March 8, 2008
WASHINGTON -- Countrywide Financial Corp. founder Angelo R. Mozilo defended his fortuitous stock trades before a congressional panel Friday, denying that he had manipulated his trading plan to unload about $141 million in stock options before the company collapsed.

"You had good timing," needled Rep. Henry A. Waxman (D-Beverly Hills), chairman of the House Committee on Oversight and Government Reform.

By making changes to his stock trading plan, Mozilo was able to vastly increase his stock sales before Countrywide shares plummeted during last year's mortgage meltdown.

Mozilo, 69, maintained that the sales, which have drawn the scrutiny of federal investigators, were prompted by deadlines he faced to exercise stock options as well as the desire to diversify his assets in preparation for his retirement.

"The goal was to reduce my holdings because of my retirement . . . almost all my net worth was in Countrywide," he said.

Mozilo also said that the timing of his stock sales was unrelated to a stock buyback program Countrywide had at the time. Such programs are sometimes used to shore up a company's stock value, but Mozilo insisted that there "was absolutely no relationship between the buyback of stock and my sale of options."

Mozilo's remarks were made at a congressional hearing on the lofty compensation levels enjoyed by certain chief executives even as their companies were hammered by losses in the sub-prime mortgage market. He was joined at the witness table by Stanley O'Neal, former head of Merrill Lynch & Co., and Charles Prince, former head of Citigroup Inc., along with members of their boards.

O'Neal and Prince were pushed out after their firms suffered billions of dollars in losses tied to ill-fated mortgage securities. Mozilo remains at the helm of Countywide, the company he founded, although he is expected to leave after Bank of America Corp. completes its acquisition of the Calabasas-based lender this year.

The hearing was meant to showcase a chief complaint of corporate critics -- that financial rewards for top executives often seem disconnected to the performance of their companies, with the current mortgage crisis offering a particularly stark case study.

Countrywide sold many of the sub-prime loans that are now going under, leading to increasing losses and its eventual agreement to be taken over by Bank of America. Merrill Lynch and Citigroup lost billions of dollars in their own dealings with mortgage-related securities that proved far riskier than advertised.

"The obvious question is this: How can a few executives do so well when their companies do so poorly?" Waxman asked. "Are the extraordinary compensation packages these CEOs received reasonable compensation? Or does the hundreds of millions of dollars they were given represent a complete disconnect with reality?"

Little was resolved Friday. The executives and board members politely defended the pay arrangements; Republicans on the panel argued that the mortgage crisis is rooted in problems more broad based than executive compensation.

"Punishing individual corporate executives with public floggings like this may be a politically satisfying ritual, like an island tribe sacrificing a virgin to a grumbling volcano," said Rep. Thomas M. Davis III of Virginia, the panel's senior Republican. "But in the end it won't answer the questions that need to be answered about corporate responsibility and economic stability."

Reports that O'Neal received $161 million after being pushed out of Merrill Lynch at a time of record-breaking losses attracted attention as well as stout defense. John Finnegan, chairman of Merrill Lynch's compensation committee, explained that the $161 million was not intended as payment for the company's troubles during 2007 but instead reflected benefits O'Neal had built up in the past, including stock and stock options, some dating to 2000 and earlier.

"All were amounts to which Mr. O'Neal was entitled," Finnegan said.

Said O'Neal: "I received no bonus for 2007, no severance pay, no golden parachute."

Lawmakers also questioned the $10-million bonus paid to Charles Prince, the former Citigroup leader who was pushed out after the firm also was hammered by losses related to the sub-prime debacle.

The bonus amount "was less than half the bonus he got in his previous year," said Richard D. Parsons, the chairman of Time Warner Inc. and chairman of Citigroup's compensation committee.

"I'm proud of my accomplishments," said Prince, while also conceding he was "ultimately responsible" for the company's actions, which included a misunderstanding of the risks of mortgage-backed securities.

But attention repeatedly returned to Mozilo, a self-made magnate who helped shape the modern mortgage business. Rep. Eleanor Holmes Norton (D-D.C.) pressed him on a recent committee disclosure that Countrywide had boosted his pay deal after a new consultant hired by the board sought to maximize what Mozilo could receive.

"None of this makes sense to me," said Norton, alluding to e-mails on the matter that were obtained by the committee. "I want to know how it makes sense to you."

Harley W. Snyder, the chairman of Countrywide's compensation committee, said he disagreed with Norton's interpretation of events, although he did not offer a detailed rebuttal.

During the hearing, Mozilo expressed regret for angry language he had used after being disappointed by a 2006 pay proposal, complaining in an e-mail that year about the "left wing anti business press and the envious leaders of unions."

The pay proposal was "sharply different than what I expected," Mozilo said Friday. "I regret the words I used. I tend to be an emotional individual."

After four hours of give and take, legislators remained deeply divided on whether the executives and their pay packages helped cause the mortgage problems that now threaten the U.S. economy.

"This is a mess," said Rep. Elijah E. Cummings (D-Md.), referring to executives "with golden parachutes drifting off into the golf field" at the same time that people "are losing their homes."

But Rep. Darrell Issa (R-Vista) had a different view.

"Mr. chairman, I look forward to finding if something is wrong here," he told Waxman. "So far you haven't found it."

jonathan.peterson@ latimes.com
http://www.latimes.com/business/printedition/la-fi-mozilo8mar08,0,2465471.story
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ABC Hints Rich CEO 'Deeply Tanned' from Sunbathing, But May Be Italian Complexion?

By Brad Wilmouth | March 7, 2008 - 21:41 ET

During a story suggesting that Angelo Mozilo, the former CEO of the mortgage company Countrywide, is unworthy of his millions of dollars and perhaps enjoys too much time lying in the sun, ABC's Dan Harris, possibly not picking up on the former CEO's Italian ethnicity which could be the source of his skin's dark complexion, remarked that Mozilo's "deeply tanned face" could become the "face of the mortgage mess." The story ran on Friday's World News with Charles Gibson, substitute hosted by George Stephanopoulos, with Harris beginning his report: "This may well become the deeply tanned face of the mortgage mess. The face belongs to Angelo Mozilo, the once-celebrated CEO of Countrywide, now facing allegations of predatory lending and rapacious greed." Harris also ended the report seeming to lament that Mozilo is not facing foreclosure on any of his homes: "If the sale [of Countrywide] goes through, Mozilo will walk away with about $40 million. And with not one of his homes in foreclosure." (Transcript follows)

Even before reporting that Mozilo is being investigated for possibly illegally selling some of his stock holdings, ABC was already portraying negatively his large bonuses and other wealth. Stephanopoulos introduced the story:

Today executives from three giant mortgage loan companies were called on the carpet by members of Congress. They've been criticized for taking multi-million dollar bonuses while their companies lost millions on subprime loans. No one is getting more scrutiny than Angelo Mozilo, who heads America's largest mortgage lender, Countrywide.

After beginning his report possibly mistaking Mozilo's natural complexion for a "deep" sun tan, and relaying accusations of "predatory lending" and "rapacious greed," Harris seemed to take exception with the number of homes owned by the former CEO. Harris:

Even before thousands of his customers went into foreclosure, Mozilo's lavish compensation -- this is just one of his homes -- attracted criticism. Several years ago, when investor Rich Ferlauto raised questions about Mozilo's large pay package, Mozilo personally confronted him.

After airing complaints by Democratic Senator Charles Schumer that while, under Mozilo's leadership, Countrywide seemed to be reaching out to help minorities buy homes, that in reality, according to Schumer, "if you picked up the rock, you'd see all kinds of worms crawling underneath," and after covering allegations that Mozilo may have illegally sold some of his stock, Harris concluded his report seeming to wish that Mozilo were also facing a home foreclosure like some of Countrywide's customers:

Countrywide and Mozilo are now facing protests and lawsuits. And the company is now being sold. If the sale goes through, Mozilo will walk away with about $40 million. And with not one of his homes in foreclosure.

Below is a complete transcript of the story from the Friday March 7 World News with Charles Gibson on ABC:

GEORGE STEPHANOPOULOS: One of the biggest drags on the economy has been the housing crisis. Today executives from three giant mortgage loan companies were called on the carpet by members of Congress. They've been criticized for taking multi-million dollar bonuses while their companies lost millions on subprime loans. No one is getting more scrutiny than Angelo Mozilo, who heads America's largest mortgage lender, Countrywide. Here's Dan Harris.

DAN HARRIS: This may well become the deeply tanned face of the mortgage mess. The face belongs to Angelo Mozilo, the once-celebrated CEO of Countrywide, now facing allegations of predatory lending and rapacious greed.

VOICE OF UNIDENTIFIED CONGRESSMAN: If you don't bear personal responsibility, I don't know who does.

ANGELO MOZILO, Former Countrywide CEO: I do take full responsibility, for anything that happens at Countrywide.

HARRIS: Even before thousands of his customers went into foreclosure, Mozilo's lavish compensation -- this is just one of his homes -- attracted criticism. Several years ago, when investor Rich Ferlauto raised questions about Mozilo's large pay package, Mozilo personally confronted him.

RICH FERLAUTO, AFSME: We're nose-to-nose, and, you know, he's sort of pointing his finger at me saying, "Ferlauto, I want to see what you're made of."

HARRIS: Critics say under Mozilo, Countrywide engaged in questionable lending practices, such as giving people loans that were higher than the value of their homes, and luring borrowers with low teaser rates. I have a brochure that they printed out here, and you can see all the faces are Hispanic and black. He became somewhat of a hero for promoting low-income and minority home ownership.

Senator CHARLES SCHUMER (D-NY): He was a great promoter. But if you picked up the rock, you'd see all kinds of worms crawling underneath.

HARRIS: Mozilo has vigorously denied reckless lending.

MOZILO: It doesn't make sense for us to make a loan that's going to fail because we lose. They lose. The borrower loses. The community loses. And we lose.

HARRIS: Another problem for Mozilo, the government is reportedly investigating his sale of hundreds of millions of dollars of Countrywide stock, much of it before the company's stock price tanked.

MOZILO: The reason I'm selling is, is that it is the majority of my net worth. I have a big family -- nine grandchildren, five children. I have a lot of education to pay for.

SCHUMER: Please.

HARRIS: You're not buying it?

SCHUMER: I do not buy it. $400 million isn't to pay tuition for no matter how many grandchildren he has.

HARRIS: Countrywide and Mozilo are now facing protests and lawsuits. And the company is now being sold. If the sale goes through, Mozilo will walk away with about $40 million. And with not one of his homes in foreclosure. Dan Harris, ABC News, New York.

http://newsbusters.org/blogs/brad-wilmouth/2008/03/07/abc-suggests-ceo-deeply-tanned-sunbathing-may-be-italian-complexion


 

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