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Lawyers for Ex-Countrywide Execs Seek Dismissal

A year after Angelo Mozilo was charged with fraud and insider trading, he is now trying to get the charges thrown out.

Lawyers for the former Countrywide Financial Corp. chief executive have filed a motion in federal court disputing the allegations by the Securities and Exchange Commission and asking U.S. District Judge John Walter to issue a ruling without a trial. A decision is expected as early as Aug. 30.

In the filing, lawyers for Mozilo and two other former Countrywide executives named in the charges said the SEC admitted that stockholders were aware of Countrywide’s loan policies and as a result, “there is no genuine issue of fact with respect to the SEC’s allegations that Countrywide hid from investors the nature of the loans it was


SEC attorney John McCoy disputed the claims, saying, “That’s just their characterization of events.”

McCoy declined to respond to the specific claims, but said prosecutors plan to issue a formal response this week.

“Certainly one of the things we’ve alleged is that there is a difference between what was being disclosed publicly and what was being recognized internally,” he said.

The trial is scheduled to begin Oct. 19 if the case proceeds.

In June 2009, the SEC filed civil fraud charges against Mozilo, David Sambol and Eric Sieracki, claiming that the executives publicly portrayed Countrywide’s loan portfolio as safe while acknowledging internally the extreme risk inherent in its lending practices.

The Calabasas company had become the nation’s largest independent mortgage lender largely through risky subprime loans. Countrywide, considered a prime contributor to the housing bubble, fell hard once the bubble burst and was sold at a fire-sale price to Bank of America Corp. in 2008. Bank of America recently agreed to pay $600 million to former Countrywide shareholders in a separate suit.

However, securities fraud cases can be difficult to prosecute, experts said, in part because they can be highly complex and difficult for juries to understand, and also because the SEC has limited resources to investigate them. Earlier this year, an appeals court threw out an SEC suit against former Broadcom Corp. co-founder Henry Nicholas III and other company executives for securities fraud.

SEC Subpoena

Last week was a busy one for CVB Financial Corp. – and one the institution might soon like to forget.

The Ontario holding company for Citizens Business Bank, which has heavy exposure in the Inland Empire real estate market, disclosed Aug. 9 that it received a subpoena from the SEC regarding CVB’s methods for calculating loan losses.

The news spooked investors and dropped shares 22 percent the following day to $8. Jonathan Elmi, an analyst with Macquarie Research, said in a note that he expects “the investigation to remain a material overhang on the stock.”

CVB Chief Executive Christopher Myers fought back, issuing a statement suggesting that the Federal Deposit Insurance Corp. found no problems during a recent examination.

“While the results of this examination are confidential, the fact that there was no negative disclosure on the FDIC website should speak for itself,” he said.

Additionally, the bank accelerated a previously announced stock buy-back program in an effort to stimulate the share price.

Shares closed at $7.48 on Aug. 12.

Firm Launch

A pair of investment advisers last week launched Belmont Capital Group, a boutique wealth management firm in Century City.

Stephen Solaka and Daniel Beckwith, former options traders on the Chicago Board Options Exchange, plan to offer consulting and hedging strategies for high-net-worth investors.

The pair specializes in hedged exchange-traded funds, which they believe offer more safety in volatile markets.

C-Suite News

UnionBanCal Corp., the San Francisco parent of Union Bank, has promoted two executives in Los Angeles. Michael Feldman has been appointed executive vice president and head of California branch banking, while Leticia Aguilar was promoted to regional executive overseeing Los Angeles, San Bernardino and Riverside counties. … Nara Bancorp Inc., the Koreatown holding company for Nara Bank, announced that Christine Oh resigned as acting chief financial officer. Chief Executive Alvin Kang will fill in until a permanent replacement is found. … Auditing firm Grant Thornton LLP has promoted Mark Hughes to partner in its L.A. office. … Citi Private Bank, the wealth management arm of banking giant Citigroup Inc., has hired Larry Tekler as managing director and Western region head of investments, based in Los Angeles. … Promerica Bank in Los Angeles has hired John Murillo as vice president and senior relationship manager.

Staff reporter Richard Clough can be reached at rclough@labusinessjournal.com or at (323) 549-5225, ext. 251.

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