WASHINGTON — Federal regulators on Thursday charged Angelo Mozilo, the former chief executive of mortgage lender Countrywide Financial, and two other company executives with civil fraud.
Civil fraud charges also were filed against former Countrywide chief operating officer David Sambol, 49, and former chief financial officer Eric Sieracki, 52.
The Securities and Exchange Commission’s civil lawsuit, filed in federal district court in Los Angeles, also accuses Mozilo of illegal insider trading.
A trail of e-mail messages sent by Mozilo in 2006, before the subprime- mortgage market collapsed in 2007, underlined the SEC’s allegations.
“The bottom line is that we are flying blind on how these loans will perform in a stressed environment of higher unemployment, reduced values and slowing home sales,” the Countrywide chief wrote Sept. 26, 2006.
The note followed a meeting with Sambol to discuss the company’s holdings of so-called pay-option ARM loans, which allowed borrowers to choose from multiple payment options, including paying less than the interest due. Option adjustable- rate mortgages were among the worst-performing loans for repayment during the downturn in the real-estate market.
Countrywide was a major player in the subprime-mortgage market, the collapse of which touched off the financial crisis that has gripped the U.S. 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.
Mozilo has denied any wrongdoing. His attorney did not immediately return an e-mail message for comment Thursday afternoon.
Mozilo, Sambol and Sieracki “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, 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.
Attorneys for Sambol and Sie racki said their clients will fight the charges.
