John P. McMurray made it clear to his Countrywide Financial Corp bosses that they were playing a dangerous game with risk. But they didn't listen.

Even so, he is being called a hero.

Warnings from McMurray are cited often in a lawsuit filed by the U.S. Securities and Exchange Commission against Countrywide's co-founder Angelo Mozilo and two lieutenants.

McMurray was chief risk officer of the lender that became a symbol of some of the worst excesses of the subprime mortgage crisis.

Mozilo, now the most prominent defendant in investigations into the U.S. housing bust and subsequent financial crisis, was charged on Thursday with securities fraud and insider trading as he made profits of more than $139 million from share sales in 2006 and 2007. Countrywide's former president David Sambol and former chief financial officer Eric Sieracki were also charged with fraud.

McMurray, who is mentioned 31 times in the complaint filed by the SEC, comes across as an internal watchdog who raised concerns that were ignored by company officers.

It is a story that may have some echoes of the role played by internal whistleblowers in other corporate scandals like Enron and WorldCom, where executives were warned about financial problems but the messengers were shunned or ignored.

He is the classic whistleblower, said Stephen Kohn, president of the Washington, D.C.-based National Whistleblowers Center, who reviewed the 53-page complaint.

He reported significant issues that would impact investors, the public, and apparently the company did not listen to him, which really caused tremendous harm.

EMAILS TELL THE STORY

Frequently cited in the lawsuit are emails from McMurray warning Mozilo, Sambol and Sieracki about the rapidly increasing risk of the loan portfolio at Countrywide, which by September 2006 estimated it had almost 16 percent of the U.S. home loan market.

He entreated them to follow the company's risk procedures.

McMurray left Countrywide in August 2007, a month after the company's surprise disclosure that it had drawn down an $11.5 billion credit line because it had trouble selling short-term debt. On August 31, 2007, Washington Mutual announced it had hired McMurray as chief credit officer, and within a week, Countrywide announced his replacement.

It wasn't immediately clear under what circumstances McMurray left Countrywide.

At WaMu, he was promoted in April, 2008 to chief enterprise risk officer. He is no longer with the company, whose banking units were acquired by JPMorgan Chase & Co after it failed and was seized by federal authorities last September.

On May 1, McMurray began working as a senior vice president and chief risk officer with the Federal Home Loan Bank of Seattle, a cooperative that provides liquidity to help make affordable housing available to the public.

A bank spokeswoman confirmed McMurray's employment and said he had declined to comment for this story.

The SEC declined to say whether McMurray had cooperated with prosecutors.

A trail of emails, which were the backbone of the SEC's lawsuit, documented how McMurray expressed concerns about Countrywide's business practices in the months and even years before the U.S. mortgage lending industry hit a wall.

In a 2005 email exchange with Sambol, McMurray warned that as a consequence of (Countrywide's) strategy to have the widest product line in the industry, we are clearly out on the 'frontier' in many areas, according to the lawsuit.

Sambol and Sieracki are accused by the SEC of knowingly writing riskier and riskier subprime loans that they had a limited ability to sell on the secondary mortgage market.

PERILOUS GRAB FOR MARKET SHARE

In a February 2007 email to Sambol, McMurray reiterated his concerns about Countrywide's strategy of matching any loan offered by its competitors, which he said could expose the company to the riskiest offerings in the market.

I doubt this approach would play well with regulators, investors, rating agencies, etc, he wrote. To some, this approach might seem like we've simply ceded our risk standards and balance sheet to whoever has the most liberal guidelines.

Countrywide grew quickly, partly because of its large appetite for risk. It fell apart just as fast.

Countrywide was at the center of the collapse of the mortgage and housing industry, a fiasco that has cost banks hundreds of billions of dollars in credit losses and write-downs.

Bank of America bought Countrywide last July for $2.5 billion, less than a tenth of what it had been worth in early 2007.

NO NOVICE

Before McMurray joined Countrywide, he had leadership roles at Freddie Mac , Crestar Mortgage Corp, and other mortgage-related businesses, according to WaMu. He has worked in the mortgage industry for more than 25 years.

Ty Poston, who recruited McMurray for two jobs early in his career, called him a top quality stand-up guy.

What would not surprise me is if John reported the facts, said Poston, who heads The Poston Group in North Carolina and recruits for the mortgage banking industry. That is who he is.

I think he is a man of integrity and a man of strong morals, and whatever cooperation and information that did or didn't happen there -- I'm certain it was by the books.

Kohn, of the National Whistleblowers Center, compared McMurray to iconic whistleblowers like Sherron Watkins of Enron and Cynthia Cooper of WorldCom.

Watkins, who was a vice president at Enron, alerted then-CEO Kenneth Lay of accounting irregularities before the company's collapse. Cooper was an internal auditor who uncovered fraud at WorldCom.

You can just substitute (McMurray's) name for some of the others, Kohn said. I think you've stumbled upon the next Sherron Watkins.

(Reporting by Steve Eder; Additional reporting by Rachelle Younglai; Editing by Martin Howell and Toni Reinhold)

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