Countrywide Financial Corp co-founder Angelo Mozilo and two other former executives at the once-largest U.S. mortgage lender were sued by U.S. stock regulators on Thursday.
The civil lawsuit, filed in Los Angeles federal court, accuses Mozilo, former Countrywide President David Sambol and former Chief Financial Officer Eric Sieracki of misleading investors about credit risks taken to build and maintain the lender's market share.
Mozilo also was charged with insider trading, realizing nearly $140 million in illegal profits, the lawsuit said.
The case against Mozilo, long one of the most prominent officials in the U.S. mortgage lending industry, constitutes the highest-profile civil case stemming from the U.S. housing collapse.
Mozilo's attorney David Siegel on Friday said his client did nothing improper and there is no basis for any claims against him. Siegel could not be reached for comment on the SEC action on Thursday.
Sambol's attorney Walter Brown called the SEC lawsuit baseless and said the agency has no case against his client.
The SEC wrongly asserts that Countrywide's disclosures to its investors regarding its lending criteria should have been more extensive, and that Mr. Sambol is somehow responsible for insufficient disclosure, Brown said in a statement.
The SEC thus wholly disregards Countrywide's detailed credit risk disclosures and the incontrovertible fact that the media widely reported these disclosures and that Countrywide's investors, bondholders, rating agencies, and the financial industry were all well aware that mortgage lending practices were liberalized at Countrywide and almost all other financial institutions during the relevant time period, Brown said.
Sieracki could not be immediately located for comment.
Mozilo co-founded Countrywide in 1969 and publicly expressed strong confidence in its prospects and survival even as problems began to mount. Bank of America Corp bought the company for $2.5 billion last July 1.
Bank of America had named Sambol to run its own mortgage business following the Countrywide acquisition but Sambol instead retired.
(Reporting by Gina Keating; Editing by Steve Orlofsky, Bernard Orr)