The U.S. Justice Department has decided against pursuing a civil case against former Countrywide Financial Corp. CEO, Angelo Mozilo, for his role, along with others, in their role in the financial crisis according to sources withing the DOJ.
Government sends letters to Mozilo and others
Prosecutors closed a criminal probe against Mozilo and his cronies about five years ago and it appears the U.S. Justice Department is content to do the same with a civil case (probe). That investigation was opened by the U.S. attorney’s office in Los Angeles after prosecutors failed to jail those from Countrywide for their roles in the financial crisis.
This was hardly with a unanimous decision as it’s believed that many in the U.S. Justice Department insisted that they had plenty of evidence against Mozilo and others to proceed but clearly they were rebuffed by the powers that be in the case.
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Mozilo hardly got off easy when the Securities and Exchange Commission ordered him to pay $67.5 million in 2010 to settle another civil case regarding conduct by Countrywide. That said, Mozilo neither admitted wrongdoing and was not personally on the hook for the whole $67.5 million in that case.
According to sources in the DOJ, with confirmation from Mozilo’s lawyer, the disgraced CEO received a letter this week informing him that the investigation and, consequently, the case was closed.
“We are pleased to see this investigation concluded without any further claim against Mr. Mozilo,” said his lawyer David Siegel.
Federal appeals court forces DOJ’s hand?
It’s likely that a a federal appeals court decision to overturn a civil fraud case against Countrywide in May, led to the U.S. Justice Department’s decision to close the civil investigation this week.
Countrywide was hardly alone in lowering its lending requirements to find new business in the sub-prime mortgage sector. It became a bit of a domino effect with companies lowering and further loosening requirements forcing others to do the same to remain competitive. At the end of the day, this practice caused tens of thousands of defaults and foreclosures, something that Mozilo did warn of in emails disclosed in a regulatory filing. (That’s not to say, other emails didn’t encourage the practice and simply didn’t come to light, we just don’t know.)
Mozilo left Countrywide in 2008 when it was purchased by Bank of America; a decision which today remains contentious with BOA execs who opposed the purchase owing to lawsuits and fines that came after the purchase.
As late as 2010, Mozilo was still defending his company that he started with his partner from nothing. He was visibly angry with the accusation of “risky” loans when interviewed by the Financial Crisis Inquiry Commission. He was long a proponent of home ownership as the foundation of the middle class and was, on occasion, willing to look at accounts with the local grocery store to determine whether or not some one was likely to pay back their loan.
“Countrywide,” Mr. Mozilo said in that interview, “was one of the greatest companies in the history of this country and probably made more difference to society, to the integrity of our society, than any company in the history of America.”
While many will bristle with the decision to drop the investigation against Mozilo, his complicity in the sub-prime lending that caused the housing bubble to burst was never proven and he’s defended that fact to the end.