18 Oct 2010

Ex-Countrywide head settles with SEC

12:33 pm on 18 October 2010

The former head of Countrywide Financial in the United States, has agreed to pay record fines to the SEC to settle fraud charges.

Angelo Mozilo will pay the US Securities and Exchange Commission $US22.5 million and repay $US45 million of profits.

He is the highest profile executive to face charges relating to the US sub-prime mortgage crisis in 2007.

The SEC claimed he and two colleagues had failed to disclose risks that Countrywide was taking.

The civil charges related to claims he had misled the market by falsely assuring investors that Countrywide was a prime quality mortgage lender that had avoided the excesses of its competitors.

Mr Mozilo was also charged with selling company shares based on inside knowledge of the company's troubles.

Bank of America eventually rescued the mortgage lender - the biggest in the United States - in July 2008, agreeing to pay $US4 billion in shares.

The BBC reports the sub-prime crisis was caused by mortgages being given to people who could not really afford them.

The loans were then repackaged by banks and sold on to investors, made to look like low-risk investments.