Countrywide CEO Faces SEC Inquiry

The New York Times is reporting Countrywide Chief Is Said to Face S.E.C. Inquiry

The Securities and Exchange Commission has opened an informal investigation into the stock sales of the chief executive of Countrywide Financial, a person briefed on the matter said last night, the latest problem to hit the struggling mortgage lender.

Countrywide’s chief executive, Angelo R. Mozilo, has come under criticism from shareholders who have questioned the timing of the sales, which allowed him to gain more than $132 million in the months before the price plummeted amid the deepening mortgage crisis.

Since 2004, Mr. Mozilo has sold shares through prearranged selling programs, known as 10b5-1 plans after an S.E.C. rule. But the pace of the sales, which have generated $300 million in gains for him since 2005, began to increase in October 2006 when he put a new program in place.

Since October 2006, Mr. Mozilo has twice raised the number of shares that could be sold under his plans. In December 2006, when Countrywide shares were trading at $40.50, he increased the number of shares to be sold each month to 465,000 from 350,000. Then in February, when shares hit a high of $45.03, he increased the number of shares sold each month to 580,000.

This month, the state treasurer of North Carolina, Richard Moore, wrote to the S.E.C. chairman, Christopher Cox, and questioned the changes Mr. Mozilo made to his selling program.

“The timing of these sales and the changes to the trading plans raise serious questions about whether this is a mere coincidence,” Mr. Moore wrote.

I am actually surprised by this. It will be interesting to see if they find anything. Otherwise I have little to add to what I said in The Art of Bailing Out.

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/