The complaint alleges that Mozilo, Sambol and Sieracki misled the market by falsely assuring investors that Countrywide was primarily a prime quality mortgage lender that had avoided the excesses of its competitors. The SEC further alleges that, from 2005 through 2007, Countrywide engaged in an expansion of its underwriting guidelines and was writing riskier loans, which the defendants were warned might ultimately curtail the company’s ability to sell them.
As to the insider trading claim, the complaint alleges Mozilo established four executive stock sale plans for himself in October, November, and December 2006 while he was aware of material, non-public information concerning Countrywide’s increasing credit risk and the expected poor performance of Countrywide-originated loans. From November 2006 through August 2007, Mozilo exercised more than 5.1 million stock options and sold the underlying shares for total proceeds of nearly $140 million pursuant to written trading plans adopted in late 2006 and early 2007.
As relief, the SEC seeks disgorgement of ill-gotten gains from Mozilo and Sambol, civil penalties against Mozilo, Sambol and Sieracki, and injunctive relief.
