SEC charges ex-Countrywide CEO Mozilo with fraud

— -- Former Countrywide Financial CEO Angelo Mozilo and two other former officials of the mortgage giant were charged with fraud by federal regulators Thursday in the first government lawsuit against top corporate executives for actions related to the financial crisis.

The Securities and Exchange Commission accused Mozilo, 70; former Countrywide CFO Eric Sieracki, 52; and David Sambol, 49, former president, of falsely leading investors to believe the mortgage giant had avoided subprime-lending mistakes, even as Countrywide issued "riskier and riskier" loans.

Mozilo, a Countrywide co-founder renowned for his high salary and other corporate perks, was also charged with inside trading that allegedly produced profits of nearly $140 million on sales of the stock in the nation's largest mortgage lender.

Defense lawyers denied any wrongdoing by the former executives and vowed to fight the Los Angeles federal civil court lawsuit that accused the three of failing to tell investors Countrywide was:

• Matching any mortgage offered in the marketplace, even risky loans offered by subprime specialists.

• Approving a high percentage of loans with risks above the firm's "increasingly lax" guidelines.

• Defining "prime" loans as mortgages approved for borrowers whose credit scores were "well below" any definition of prime credit quality.

SEC enforcement director Robert Khuzami said evidence shows the three painted a cheerful "mirage" that falsely characterized Countrywide as operating under "prudent business practices and tightly controlled risk."

"But the real Countrywide, which could only be seen from the inside, was one buckling under the weight of deteriorating mortgages, lax underwriting and an increasingly suspect business model," Khuzami said.