Countrywide Financial’s Angelo Mozilo is under the gun for selling stock while allegedly pumping it in the media. Can you say “10b5-1 Plan“?
According to BusinessWeek, he claims to have “sold stock options (via cashless exercise) while holding most of his net worth in Countrywide.”
I wonder if he means he’s holding Countrywide Financial’s stock or if he has a large bank account at Countrywide full of cash? But I digress…
Now he is named in a class-action suit for breaching his fiduciary duties under the Employee Retirement Income Security Act (ERISA) between the dates of October 27, 2005 and August 9, 2007.
Guests on CNBC this morning made references to Enron because many Countrywide employees own Countrywide stock in their retirement plans while Mozilo was liquidating some of his holdings. Many Enron employees were encouraged to hold Enron stock while the top executives dumped their shares and their company collapsed.
While Mozilo may have raised a few eyebrows with the timing of his sales, the plaintiffs have a long way to go to prove that he committed a crime. I don’t think the Enron references are fair. But that’s why Mozilo makes the big money – and keeps it!
According to SEC filings reported in the Los Angeles Business Journal, Mozilo’s transactions were under a 10b5-1 Plan he set up in December of 2006 and amended in February of this year. The rub will be for the plaintiffs to prove that Mozilo had “material” inside information at the time he amended his plan. This will not be easy to do.
The plaintiffs attorneys will have to make a chronological assessment of his emails, correspondence, corporate filings, and notes from meetings with other lenders to ascertain if he breached his fiduciary duties.
To put this in perspective, Enron’s Jeffrey Skilling is a convicted felon for his efforts, and is serving a 24 year and 4 month sentence in prison. He was also fined $45 million. His boss, Kenneth Lay was indicted on 11 counts, but died before sentencing. His conviction was vacated after his death. Here’s the score on Skilling:
- guilty on one count of conspiracy
- guilty on one count of insider trading
- guilty on five counts of making false statements to auditors
- guilty on twelve counts of securities fraud
That’s why the Enron reference this morning was a little too much, IMHO.
Barron’s listed Mr. Mozilo as one of the 30 most respected CEOs in the world for the past three years.
