Countrywide Faces New Allegations in Class Action Suit

April 16, 2008 No Comments »

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New York State Comptroller Thomas P. DiNapoli, New York City Comptroller William C. Thompson, Jr. and the New York City Pension Funds filed an amended complaint against mortgage lender Countrywide last week, alleging distortion of industry definitions and insider trading.

The filing says Countrywide “covertly distorted” the meaning of such terms as prime and subprime borrowers and related mortgages to mislead investors about the lender’s position and business strategy.

The suit now also accuses top Countrywide executives of engaging in insider trading, whereby they dumped shares of the floundering stock while unknowing investors were encouraged to buy shares.

Additionally, it alleges that the pension funds have lost millions as a result of misleading statements and factual misrepresentations made by Countrywide.

In other words, Countrywide knew it was originating toxic option arms by the bucketload, but ensured investor that these types of loans were sound.

Shares of Countrywide, which have plummeted nearly 90 percent in the past 52 weeks, were up 27 cents, or 5.67%, to $5.02 in afternoon trading on Wall Street.

(photo: jef)

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