Pension Fund Sues Countrywide Financial Executive Officers
LOS ANGELES (Reuters) - The chief executive of Countrywide Financial, Angelo R. Mozilo, has been sued by a pension fund that accused the company of helping executives pocket improper gains by artificially inflating its stock price through share buybacks.
The pension fund, the New England Teamsters and Trucking Industry Pension Fund, accused Mr. Mozilo, other Countrywide executives and its board of gross mismanagement for improperly using $2 billion in cash to repurchase stock.
It said the move allowed executives to sell shares of Countrywide worth $842 million at artificially high prices from April 2004 to October 2007, at the expense of ordinary shareholders.
Countrywide had no immediate comment on the lawsuit.
The lawsuit, filed Monday in Los Angeles Superior Court, cited news reports that insider share sales at Countrywide reached a five-year peak in March, four months before the company posted a 33 percent drop in second-quarter earnings and cut its full-year earnings forecast.
On October 26, Countrywide posted a $1.2 billion third-quarter loss, but projected a fourth-quarter profit. The company’s shares have fallen by about 60 percent this year.
Countrywide, based in Calabasas, California, is at the center of the subprime mortgage crisis in which rising interest rates have caused tens of thousands of homeowners nationwide to default on adjustable-rate mortgages.
The shareholder derivative lawsuit was filed by the securities class-action specialist Coughlin Stoia Geller Rudman & Robbins. Shareholder derivative actions allow a shareholder to bring claims of mismanagement on behalf of the company.
The lawsuit names six executives in addition to Mr. Mozilo, eight directors, five former directors and Countrywide’s auditor, KPMG.