Angelo Mozilo, the spectacularly tan co-founder of Countrywide Financial Corp., is reportedly in trouble with prosecutors once again due to his company’s loose lending standards leading up to the financial crisis. This latest prosecution comes three years after the Justice Department abandoned a criminal investigation into Mozilo.
According to a report by Bloomberg, the U.S. attorney’s office in Los Angeles will use a law that dates to 1989 and the aftermath of the savings and loan scandal to bring civil charges against Mozilo for his role in the financial crisis. The Financial Institutions Reform, Recovery and Enforcement Act gives prosecutors a lower bar for bringing civil charges than criminal charges require. The law also allows 10 years to bring charges.
To date, the largest punishment Mozilo has received for his involvement in the subprime mortgage crisis was a $67.5 million settlement with the SEC in 2010 for misleading Countrywide investors. As part of that settlement, Mozilo neither admitted nor denied any wrongdoing.
“The fine is a compelling case for the defense of Angelo Mozilo,” says Heidi Moore, Finance and Economics editor at The Guardian U.S. “He already went through this, but he didn’t go through a court case so it’s not double jeopardy. It’s six years after the financial crisis and the one remaining question is: Why has no one prominent gone to jail?”
Mozilo was held up as something of a poster child for Wall Street greed at the height of the financial crisis and through the aftermath. Congress called him to testify, and Senator Charles Schumer (D-NY) was quoted by Bloomberg as saying that Countrywide would, "come to symbolize what went wrong with housing."
According to the Bloomberg report, the government is preparing to bring civil charges against Mozilo and up to 10 of his former Countrywide colleagues. The prosecutors' case may be helped along by the record Bank of America (BAC) settlement announced Thursday, in which the bank agreed to pay $17 billion due, in large part, to Countrywide's mortgage-lending practices. Bank of America acquired Countrywide in 2008.
The reason the government is reopening this case, says Moore, is because it's been shamed for not prosecuting financial institutions involved in the crisis. “The government has been putting more effort into bringing these mortgage cases to bear. [The Justice Department] settled with JP Morgan (JPM) last year, Bank of America this year… and Angelo Mozilo, insofar as anyone could be, was really the maestro of the financial crisis.”
Mozilo’s lawyer, David Siegel said in Los Angeles Wednesday that, “There is no sound or fair basis, in law or fact, to pursue any claim against Angelo Mozilo.” Siegel also claimed Mozilo was being unfairly singled out saying he, “stands virtually alone among banking and mortgage executives to actually have been pursued by this government before and already paid a record penalty.”
Yahoo Finance Editor-in-Chief Aaron Task believes the prosecution may have a tough time making its case. "I would have to think that if the government could have made a case against Mozilo they already would have, and they dropped the [previous] criminal probe,” he says.
Moore believes that there could be something else. “We have a ton of documents on all of this; the government has not had the resources to go through them and so there could be smoking guns in there,” she says.
Still, “they might well lose the case,” says Moore. “It’s risky to take this on so late after the financial crisis with the number of documents they have to deal with. It’s an uphill battle.”
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