Crook Alert--Countrywide--Enron's Second Coming? by Paul Krugman
10-15-10NYTimes--Mozilo Settles With SEC for $67.5 million Without Admiting or Denying Guilt
- Mozilo Disgorges Ill-gotten Gains--$67.5 Million
Angelo R. Mozilo, the founder and former chief executive of Countrywide Financial, once the nations largest mortgage lender, agreed to pay $67.5 million Friday to settle a civil fraud case brought by the Securities and Exchange Commission last year.
6-8-10 NYTimes--Countrywide Settles for $109 Million
- Countrywide Agrees to $108 Million for Excessive Fees Charged Homeowners Facing Foreclosure
The fees, which were billed as the cost of services like property inspections and lawn mowing, were grossly inflated as Countrywide created new subsidiaries to hire vendors to supply the services, allowing the company to increase fees in the process,
Countrywide Victimized Three Distinct Groups
In his column this morning (10-1-07) Paul Krugman says that
"It appears that Mr. Mozilo (Countrywide's CEO who paid himself $142 million last year) achieved the rare feat of victimizing three distinct groups.
"First were the borrowers. As the Times's Gretchen Morgenson reported in August, Countrywide often led customers to 'high-cost and sometimes unfavorable loans' that, among other things, generated 'outsize fees to company affiliates providing services on the loans.'
"Then there are the investors who bought those Countrywide mortgages directly or indirectly, in the form of financial instruments created by slicing and dicing claims on borrowers.
"You can't especially single out Countrywide for the failure of investors to realize how much risk they were taking on--that's a failure with many fathers, including everyone from Moody's and Standard and Poor's, which were far too free with their AAA ratings, to Alan Greenspan, wh assured us that while there might be a bit of 'froth,' there was no national housing bubble.
"Last but not least, since it may be the key to the whole story, is the victimization of Countrywide's own stockholders.
"Last year Mr. MOZILO'S HUGE COMPENSATION DREW A PROTEST FROM A GROUP OF SHAREHOLDERS INCLUDING THE AMERICAN FEDERATION OF STATE, COUNTY AND MUNICIPAL EMPLOYEES PENSION PLAN. BUT THE WORST WAS YET TO COME.
In late 2006, even as Countrywide began using shareholders' money to buy back its own stock at more than $40 a share--it's now worth only $19--Mr. Mozilo wasw selling. Between November 2006 and August 2007--that is, during the months before investors fully realized the extent to which his company would be hurt by the subprime mortgage crisis--he unloaded $138 million worth of of Countrywide's stock."