Feds close criminal case against Angelo Mozilo

Prosecutors concluded that actions by the former Countrywide CEO did not amount to criminal wrongdoing. LAT first reported the story. Mozilo did face a civil action by the SEC, agreeing to pay a $22.5 million fine. Another $45 million will be going to former Countrywide shareholders, but that money will be paid by Bank of America, which now owns Countrywide, and the bank's insurance companies.

"Sometimes the public thinks all you have to do is to indict someone and that's it," one of the federal sources said. "But you have to be able to prove your case, and it can be worse losing a case than not bringing one at all."

This won't go down well among the Countrywide shareholders who got burned when the company's stock fell off a cliff. It's especially irritating after the release of emails that show Mozilo was aware of the risky loans being marketed by Countrywide. Of subprime mortgages, he says, "In all my years in the business, I have never seen a more toxic product." But government prosecutors have had a hard time developing strong criminal cases growing out of the financial meltdown. Defense attorneys say that Mozilo's remarks have been taken out of context (right).

Columbia University law professor John Coffee said mortgage cases like Mozilo's were muddied by the numerous parties involved, unlike Enron and other "cook the books" cases in which executives were convicted. Countrywide's model was to make or buy mortgages only to sell them off immediately to Fannie Mae or Wall Street as fodder for securities. Given that model, Coffee said, blame could be assigned to an entire chain of players: mortgage brokers who falsified applications; investment bankers who concocted complex and "opaque" mortgage bonds; rating firms that provided high ratings on the bonds but said they were lied to; and institutional investors that relied on dubious ratings because the securities carried above-market interest while promising to be risk-free. "All share responsibility, but none are culpable enough by themselves to compare with [Enron's] Ken Lay, Jeff Skilling or the WorldCom CEO," Coffee said.

Most of the activity has been on the civil side. Earlier this month, a a former Countrywide executive who alleged that he was pushed out for not adhering to the company line was awarded $3.8 million in damages. The jury heard from Mozilo and other Countrywide executives. "There was an air of arrogance about them," one juror told the NYT.

[Michael] Winston's story provides a glimpse into how business was done at Countrywide at the height of the subprime craziness -- and how assiduously Angelo R. Mozilo, the company's fallen leader, worked to quash dissent in the ranks. Mr. Winston had the audacity to question Countrywide practices. Mr. Mozilo was not pleased and, before long, Mr. Winston was marginalized and later dismissed.