Friday, June 05, 2009
The doo-doo is getting deeper for the Orange Man, Countrywide Financial founder and former CEO Angelo Mozilo, who, yesterday, was on the receiving end of insider trading and securities fraud charges from the Securities and Exchange Commission.
What becomes of this all may be somewhat anticlimactic as both parties - the SEC and Mozlio - have tattered reputations, sorely in need of rebuilding, though only one stands a chance of serving time for their previous misdeeds.
A search here at this blog results in a veritable treasure trove of Tangelo-related goodies going all the way back to 2005 when the housing boom and Countrywide's stock price were near their peaks.
Interestingly, the title "It just looks bad!" was used twice for Tangelo, once on the subject of his late-2007 stock sales (which the SEC is, for understandable reasons, now keenly interested in) and again for an early-2008 Colorado bankers' ski trip.
Long one to point fingers at others, citing falling home prices (yes, really), rabid speculators, and low interest rates from the Federal Reserve as the root causes of the nation's housing market ills, fingers are now pointed squarely in his direction as incriminating emails have now surfaced.
This report in Bloomberg provides the details:
The day after Countrywide Financial Corp. Chief Executive Officer Angelo Mozilo arranged to start $139 million in stock sales, he told two top deputies there was “no way” to value one of its most popular mortgages.Here's a graphic from that late-2007 reference above detailing the many stock sales as the housing bubble was rapidly losing air (recall that there was a short pause when the credit crisis first began in earnest back in August of 2007).
“We are flying blind on how these loans will perform in a stressed environment of higher unemployment, reduced values and slowing home sales,” he wrote in a 2006 e-mail released yesterday by the Securities and Exchange Commission. “We have no way, with any reasonable certainty, to assess the real risk of holding these loans on our balance sheet.”
While Mozilo acknowledged in e-mails the risks associated with Countrywide’s loans and the company’s need to sell the option-ARM portfolio, he was simultaneously arranging to dump his own holdings, according to the SEC’s complaint.
In the final months of 2006 he began establishing four sale plans “while in possession of material, non-public information concerning Countrywide’s increasing credit risk,” the SEC said. From those plans, he exercised over 5.1 million stock options and sold the underlying shares for total proceeds of almost $139 million.
The SEC authorized such plans in 2000 to let executives sell shares without the appearance of tapping current information on their companies. Still, the SEC may make its case against Mozilo, if it can show he had significant information that the market lacked when he arranged his sales, said Robert Hillman, a securities law professor at the University of California, Davis.
And, of course, there's this classic interview with CNBC's Money Honey Maria Bartiromo during the summer of that same year.