Countrywide agrees to pay $600M to settle lawsuits
Countrywide Financial Corp has agreed to pay $600 million to settle shareholder lawsuits in the largest payout so far from the mortgage meltdown.Updated: Aug 03, 2010, 23:05 IST
Countrywide Financial Corp has agreed to pay $600 million to settle shareholder lawsuits in the largest payout so far from the mortgage meltdown.
US District Judge Mariana Pfaelzer in Los Angeles on Monday gave preliminary approval to the agreement, in which the defendants admitted no wrongdoing.
The settlement would end several class-action lawsuits that claimed Countrywide concealed mounting risks as it loosened its standards for loans during the housing boom.
The Calabasas company was once the nation's largest mortgage lender and was acquired by Bank of America Corp. in 2008. The settlement would clear former executives and financial firms that underwrote Countrywide stock and were named in the class-action suits.
Former CEO Angelo Mozilo, former President David Sambol, former CFO Eric Sieracki and former board members were named in the litigation.
The company is being investigated by the Securities and Exchange Commission, which filed a lawsuit accusing Mozilo, Sambol and Sieracki of misleading investors.
The company and Mozilo are also under criminal investigation by the Justice Department and the attorneys general of California. Other states have also sued on behalf of borrowers. "It is the largest settlement of any shareholder case to come out of the subprime crisis this far," said Joel Bernstein, attorney for the New York state and city pension funds that were the lead plaintiffs.
The settlement doesn't cover investments in mortgage-backed securities sold by Countrywide.
Countrywide's accounting firm, KPMG, which signed off on the lender's financial statements from 2005 to 2006, agreed to pay an additional $24 million as part of the settlement. Lawyers are requesting fees of more than $47 million, or about 7.6 percent of the total settlement, Bernstein said.