SEC Investigating Mozilo Stock Sales
By KARA SCANNELL and JAMES R. HAGERTY
October 17, 2007 6:12 p.m.
The Securities and Exchange Commission has opened an informal investigation into stock sales by Countrywide Financial Corp.'s chief executive officer, deepening problems at the nation's largest mortgage lender, according to people familiar with the matter.
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Countrywide is one of a dozen companies the SEC is investigating in connection with the subprime fall-out. At least one area of inquiry, these people say, involve sales by founder and Chief Executive Officer Angelo Mozilo, who sold at least $130.6 million in company stock in the first half of the year through executive sales plans.
Countrywide isn't the only mortgage lender under investigation. New Century Financial Corp., a mortgage lender that filed for bankruptcy court protection earlier this year, is also the subject of a SEC and Justice Department investigation into accounting and stock-sales by senior executives also using executive sales plans.
These plans, known as "10b5-1" plans, have been employed by hundreds of executives to enable senior executives to sell shares at regular intervals. If executives pledge they don't have any insider information at the time the plans are established it can be used as a defense against insider-trading charges.
Earlier this year, the SEC said it is taking a hard look at these plans following an academic study that found that insiders were starting these plans just ahead of big stock drops. The findings suggest some plans may have been abused.
"We don't comment on communications with our regulators," said Rick Simon, a spokesman for Countrywide.
Walter Ricciardi, a deputy director of the SEC's enforcement division, declined to comment on Countrywide but has said the agency is looking at "accounting, disclosure and insider sales by all participants involved in pricing the securities, including company management, auditors, lawyers and credit rating agencies." The SEC formed a subprime working group in January and this summer SEC Chairman Christopher Cox said the agency had a dozen investigations involving packaged loan products tied to subprime mortgages.
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