In a lawsuit filed Monday in Los Angeles Superior Court, a pension fund accused CEO Angelo Mozilo and many other Countrywide executives of gross mismanagement for improperly using $2 billion in cash to repurchase stock.
The New England Teamsters & Trucking Industry Pension Fund claims Countrywide executives pocketed hefty gains by artificially inflating the lender’s stock price through share buybacks.
The lawsuit said executives sold $842 million of Countrywide shares at inflated prices between April 2004 and October 2007 at the expense of shareholders.
The claim cited recent news reports which indicated that insider selling reached a 5-year peak in March 2007, just months before the mortgage crisis was in full swing.
The pension fund holds more than 125,000 shares of Countrywide, and has been a stockholder for over a decade.
The lawsuit names President and Chief Operating Officer David Sambol; Executive Managing Directors Carlos Garcia, Ranjit Kripalani and Andrew Gissinger III; Chief Legal Officer Sandor Samuels and Chief Financial Officer Eric Sieracki.
It also names a slew of board members including recent deserter Henry Cisneros and Countrywide’s auditor KPMG.
The suit was filed by securities class-action specialist Coughlin Stoia Geller Rudman & Robbins.
Last Friday, Chief Executive Angelo Mozilo confirmed that the U.S. Securities and Exchange Commission had opened an informal inquiry into his stock sales after he realized more than $100 million in gains since he began selling shares on a regular basis last October.
Mozilo said “categorically” that “at no time” did he make any trading decisions based on material, nonpublic information.
Yesterday, the Securities and Exchange Commission charged a former Countrywide executive for insider trading, resulting in a $109,000 fine.
The top U.S. mortgage lender reported third-quarter earnings last Friday, revealing a $1.2 billion loss, its first quarterly loss in 25 years.
Shares of Countrywide ended the day at $15.94, well below the $40 share price the company enjoyed for much of the first half of 2007.