Why Mozilo Was Charged With Insider Trading

Why Mozilo Was Charged With Insider Trading
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The SEC has charged Angelo Mozilo with civil fraud and insider trading.

Civil fraud charges also were filed against Countrywide's former chief operating officer David Sambol and ex-chief financial officer Eric Sieracki, according to the AP.

Executives such as Mozilo are considered "Control People" because the decisions they make can affect their firm directly. You can consider everything they know to be "insider" information.

In order to dispose of their stock holdings, Control People can sell stock and not be charged with Insider Trading if they execute what is known as a 10b5-1 Plan. They plan to sell stock according to a predetermined schedule, so that the disposition of the stock sale will have been made long before one would have had knowledge that was material, non-public information - insider information.

Mozilo had such a plan, but amended it, and that his where his trouble began. The amendment had the 10b5-1 plan sell stock more aggressively.

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