Countrywide Financial Corp. has agreed to settle allegations of investor fraud with New York for $600 million.
In November 2007, New York Comptroller Thomas P. DiNapoli and the New York City Pension Funds were named as lead plaintiffs in a class action against Countrywide, according to the plaintiffs’ lead attorneys Labaton Sucharow LLP. The case was filed in U.S. District Court for the Central District of California.
Countrywide, some of its directors and some of its executives were accused of violating the Securities Act of 1933 and the Securities Exchange Act of 1934. The defendants allegedly misstated and omitted material facts about underwriting riskier loans than they were letting on.
As shares of the company became artificially inflated, Countrywide insiders pocketed $867 million from stock sales — including $450 million received by former chief executive officer Angelo R. Mozilo — according to Labaton Sucharow.
Meanwhile, investors lost $25 billion.
The proposed settlement calls for a $600 million payment from Countrywide and $24 million from Countrywide’s accounting firm, KPMG.
Labaton Sucharow said the proposed settlement would be the “13th largest securities class action settlement in the history of the Private Securities Litigation Reform Act.”
Once the judge reviews the proposal for preliminary approval, notice will be sent to class members, and a final approval hearing will likely occur in September.
“Countrywide’s singular effort to overtake its competitors and capture a dominant share of the nation’s residential loan market was the impetus for one of the largest cases to enforce securities laws in recent years,” Labaton Sucharow Senior Partner Joel Bernstein said in today’s statement.
A spokeswoman for Countrywide parent Bank of America Corp. was unable to immediately comment on the settlement.
