Insider Trading Claims Cut For Ex-Countrywide Execs

Insider Trading Claims Cut For Ex-Countrywide Execs - 4/8/2009

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HEADLINES \| SETTLEMENTS AND DISMISSALS \| COURT FILINGS LINKS TO OTHER NEWS \| NEWS ARCHIVE	HEADLINES ARCHIVED SETTLEMENTS AND DISMISSALS ARCHIVED

DISMISSAL NEWS:

Insider Trading Claims Cut For Ex-Countrywide Execs
Jessica Dye

Securities Law 360. April 8, 2009
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EXCERPT: A judge has dismissed allegations of insider trading against three former executives of mortgage lender Countrywide Financial Corp., but allowed the claims to stand against ex-CEO Angelo Mozilo, in a shareholder suit accusing the executives of profiting from inflated share prices while the company suffered significant losses. Judge Mariana Pfaelzer of the U.S. District Court for the Central District of California issued rulings Monday regarding a slew of motions in the shareholder class action against Countrywide, several former directors, stock offering underwriters and outside auditing firm KPMG LLP. The motions sought to dismiss charges that the defendants perpetrated an intricate scheme to misreport financial information about risky mortgages, leaving shareholders on the hook as insiders allegedly reaped $867 million in stock sales. Judge Pfaelzer dropped charges of insider trading against former chief operating officer Stanford Kurland, former president and chief operating officer David Sambol and former executive managing director and chief financial officer Eric P. Sieracki, while allowing other claims of false corporate reporting to go forward. Mozilo's motion to dismiss the claims against him was denied in full, however. Judge Pfaelzer's ruling cited an “unusual” modification to Mozilo's automatic stock sale plan, which took effect in October 2006. She ruled that any transactions before then would be exempt from the suit. According to the complaint, Mozilo personally took in more than $450 million in Countrywide stock sales during the class period. Judge Pfaelzer also reinstated claims from a former consolidated amended complaint, re-presented in the plaintiffs' second amended complaint, against KPMG, in which the plaintiffs claimed that the auditor “acted with deliberate recklessness” in violation of the generally accepted auditing standards, by ignoring various risk factors in Countrywide's financial practices.

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