Countrywide is paying the biggest tab yet in settling a subprime class action suit.
And like it or not, the deal brings a rare bit of good news for some embattled former executives of the troubled mortgage lender, including longtime CEO Angelo Mozilo (right).
A federal judge signed off Monday on a settlement under which former shareholders of the troubled mortgage will get $624 million, the Los Angeles Times reported. The plaintiff lawyers called the sum the largest shareholder settlement since the mortgage meltdown started in 2007.
The company didn’t admit to any wrongdoing. “Countrywide denies all allegations of wrongdoing and any liability under the federal securities laws,” a spokeswoman writes. “We agreed to the settlement to avoid the additional expense and uncertainty associated with continued litigation.”
But shareholders led by a group of New York pension funds say they were ripped off when Countrywide failed to inform them of its growing dealings in low-quality loans.
“Countrywide’s actions have improperly enriched executives at the expense of shareholders,” New York City Comptroller John C. Liu, who serves as a trustee of some of the plaintiff pension funds, said in May when a preliminary deal was reached. “This historic settlement sends a strong message that this behavior is unacceptable in Corporate America, and that management will be held accountable to shareholders, especially when they put self-interest before shareholders’ interests.”
But how strong is the message when all the payments will be made by Countrywide’s owner and its auditor? Not a penny will be paid by the executives and directors who were at the helm when the company plunged head-on into the business of lending to riskier customers.
Bank of America, which acquired the mortgage lender two years ago and has since stopped using the Countrywide name, will pay $600 million and accounting firm KPMG will pay $24 million.
The Countrywide settlement comes just days after officers and directors in another big subprime class action agreed to pay $90 million to settle claims in that case. New Century co-founder Brad Morrice said then that he hoped the settlement “would make up for some of the losses suffered and provide closure to me and the shareholders.”
Closure isn’t coming any time soon for Countrywide. Bank of America’s annual report provides a list of legal cases tied to Countrywide that covers parts of three pages.
Nor is Mozilo out of the woods. He and two other former Countrywide execs still face a Securities and Exchange Commission fraud suit that centers on familiar allegations, that the company duped shareholders by failing to disclose the growing risk of its subprime lending business.
Still, for one more day at least he and his friends atop the nation’s most notorious subprime lender got off scot-free.