Judge: Countrywide Officers To Face Suit By Shareholders

LOS ANGELES — A federal judge has ruled that a shareholder lawsuit against Countrywide Financial Corp. executives and directors should go to trial, rejecting several arguments by the troubled mortgage lender to dismiss the case.

In a ruling issued Tuesday, U.S. District Judge Mariana R. Pfaelzer in Los Angeles sided with several public pension funds, finding that their witnesses' accounts of Countrywide's business practices were compelling.

"Plaintiffs' allegations create a cogent and compelling inference that (Countrywide directors) misled the public with regard to the rigor of Countrywide's loan origination process, the quality of its loans, and the company's financial situation _ even as they realized that Countrywide had virtually abandoned its own loan underwriting practices," Pfaelzer wrote in the 61-page ruling.

Pfaelzer noted that several witnesses ready to testify for the funds gave persuasive accounts of Countrywide's business, including allegations that the company rewarded employees for boosting loan volume rather than for generating quality loans.

The lead plaintiffs in the case are several pension funds, including the Arkansas Teacher Retirement System, the Fire & Police Pension Association of Colorado and the Public Employees Retirement System of Mississippi.

They claim Countrywide directors and officers failed to provide enough oversight of the lender and misled shareholders about the company's true financial state.

Countrywide Chairman and Chief Executive Angelo R. Mozilo and 13 other current and former top executives and board members are named as defendants in the complaint.

Blair Nicholas, an attorney for the pension funds, said his clients are looking forward to having their day in court.

"The Board's lack of oversight has tarnished Countrywide's reputation and exposed the company to significant liability," Nicholas said via e-mail Wednesday. "As shareholders, we believe it is our duty to step in and remedy this wrong."

A spokesman for Calabasas, Calif.-based Countrywide did not immediately reply to an e-mail request seeking comment.

Countrywide asked the court to dismiss the case, in part on the grounds that the pension funds did not have legal standing because they had not shown they consistently held stock in the company.

The lender, which in January agreed to sell itself to Charlotte, N.C.-based Bank of America Corp. for about $4 billion in stock, has been the target of shareholder and consumer lawsuits since last summer's housing crash.

The company has since struggled to stay afloat as loan defaults pile up and the housing slump drags on.

Countrywide shareholders have seen the value of the company's stock plunge by more than 80 percent from its five-year peak of $45.03 in February 2007.

Countrywide shares fell 13 cents, or about 2.6 percent, to $4.85 Wednesday.

Comments

[gcallaghan]

Argentina, here we come

[filo]

I'm shocked that someone is going to be held accountable for their corporate and personal greed..

[jukesgrrl]

Countrywide execs belong in prison. No fine is big enough for the damage they've done to the whole nation. But DO NOT stop there. The government agencies that enabled Countrywide should be disbanded and their administrators should be on the unemployment line. Where's the oversight????

[dukeitout]

But the "free marketers" say government oversight is unnecessary and wasteful. The nickel-grinding republicans in the Congress and the White House intentionally provided only very limited funds to oversee things. Crooks don't need oversight. Just ask them.

[dadw5boys]

I hope they bust Country Wide for COLLUSION between the Property Appraisers and the Country Wide Offices. They constantly over valued homes to make more money when they sold the packaged loans.

[elpollo]

We wish. They still own the government. When el chimpo goes to Farm Fed, I'll be a believer.

[DELICIOUS]

GOOD! THOSE NO GOOD LYING HYPOCRITES WHO TOOK ADVANTAGE OF THE MIDDLE CLASS AND LOW INCOME FAMILIES DESERVE TO BE BROUGHT BEFORE A COURT OF LAW FOR JUSTICE. THE MISERABLE CEO GOT A 10 MILLION DOLLAR BONUS BEFORE HE LEFT. IT IS TIME FOR PEOPLE TO STOP THESE MANIPULATIONS OF CITIZENS MONEY FOR THE GREED OF CORPORATE UN-AMERICA.

[loki]

To bad they are only going after the big names, there are many little independent brokerages who cloaked their real intentions under the name MegAmerica , a company name by a Good Ole Boy Texan and personal friend of Bush. I cant recall his name, but he created this name and was issued a nationwide license , thanks to buddy boy George. Any criminal with a grand or so can use the megamerica name and license to fool the unknowing borrower into signing into a bogus mortgage contract , that really reams them. Then the mortgages are sold off as quick as possible and out of the megamerica broker and loan officers hands. They lend nothing, hold nothing, just rip off everyone.
But, I imagine being a person friend of Bush, this pyramid mortgage scam will go free, as well as the many criminals who use its name as legal cover.

[Robespierre]

I fear that we're going to see many similar actions against many more corporations for fiduciary mishandling. I say that it's about time that these scofflaws get their butts put onto the fire! Enough is enough. They're no better than convicted rapists and murderers due to the number of families who have been ruined because of their actions. I personally would like to see more of the bums from Enron brought to justice. And how about Monsanto. Now there's a ripe plum for the picking. While we're at it, Exxon-Mobil and the other robber barons.

To the Bastille we go!