Academic

I had previously blogged that the individual Countrywide officers who are defendants in a civil action brought by the SEC had lost their motions for summary judgment.  Trial was set for this month, but the parties announced on Saturday that a settlement had been reached.  (Law.com article here; NYT here.)  Former CEO, Chair and founder Angelo Mozilo agreed to pay $67.5 million, with $22.5 million being paid out of his own pocket (Bank of America will pay balance, though some has already been paid).  The other defendants settled for much lower amounts, with BoA covering "nonpenalty amounts."

The Court in this case emphasized that the settlement was fair and in the public interest.  The judge also noted that he was looking forward to the trial.  So was I!  The NYT on Saturday thought that the SEC was saving themselves a hard trial (quoting Duke law prof Jim Cox), but I'm still thinking about that.  They've won on the law.  Now, they have to find a jury  in California who isn't sympathetic to a mortgage company specializing in subprime mortgages?  Wow.  That doesn't sound too hard.  I would think that the SEC would have a good time with the factfinders. 

The only hesitation I might have had if I were SEC counsel is that the emails they pulled out for Mozilo could be read two ways.  On the one hand, Mozilo clearly knows that the Countrywide portfolio is increasingly made up of "toxic" loans that do not meet usual lending criteria.  On the other hand, the emails show him trying to persuade others to change the practices and sell the toxic loans.  He seems to be the one trying to save the company, but he's getting outvoted.  Perhaps this might have made him more sympathetic to the jury.  However, I would bet that the jury would hold him responsible anyway, as CEO, who should have been more forceful.

Or, perhaps the SEC was worried about an appeal of the MSJ.  Perhaps a higher court would have taken the defendants' puffery arguments more seriously and would have been more of a stickler for determining whether a general statement ("we write quality mortgages") is capable of being a false statement for securities law purposes.  There were also insider trading charges relating to trading plans, but I have not followed those as closely.

Anyway, $67.5 million is a whopper of a settlement for an individual.  (Remember how we were supposed to swoon over Goldman's $550 million settlement?)