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: JURIST - The Paper Chase

Federal judge approves $600 million Countrywide class action settlement

By Andrea Bottorff

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[JURIST] US District Court for the Central District of California [official website] judge Mariana Pfaelzer on Monday gave preliminary approval to a settlement in which Countrywide Financial Corporation [NYT backgrounder] agreed to pay $600 million to settle several class action lawsuits brought by former stockholders accusing the company of securities fraud. The settlement is the largest such agreement resulting from the financial crisis [JURIST news archive] and was announced in quarterly report [text, PDF] sent from Bank of America [corporate website], which acquired Countrywide in 2008, to the US Securities and Exchange Commission (SEC) (official website). The plaintiffs in the lawsuit had claimed that Countryside's directors and officers failed to provide effective oversight of the company's origination, lending, and underwriting practices, which caused the company's stock to plummet. Countrywide denied that it committed any crimes against investors and former CEO Angelo Mozilo [TIME profile], former president David Sambol and former CFO Eric Sieracki were not obligated to contribute to the settlement despite being named in the lawsuit.

Last month, Countrywide reached a $108 million settlement agreement [JURIST report] with the Federal Trade Commission (FTC) [official website] to resolve charges that it collected excessive fees from homeowners facing foreclosure. The agreement allows the FTC to create a fund to provide refunds to borrowers affected by the company's improper fees. Also last month, the SEC charged [JURIST report] former Countrywide officials with securities fraud arising from misleading investors. The complaint alleged that the officials knew the company was issuing risky loans and that defaults and delinquencies would rise as a result. Since the financial crisis, Countrywide has also settled lawsuits with the SEC and several state attorneys general [JURIST reports].

Full post as published by JURIST - The Paper Chase on August 03, 2010 (boomark / email).