WASHINGTON _ The Securities and Exchange Commission filed fraud charges against former Countrywide Chief Executive Angelo Mozilo and two other individuals, the agency said Thursday.

The agency charged Mozilo and the company's former chief operating officer, David Sambol, and former financial chief, Eric Sieracki, with securities fraud for failing to disclose credit risks, concerns and uncertainties they had with the company's future, according to Khuzami.

"Reading Countrywide filings, we would assume that most mortgages were prime mortgages," said SEC Enforcement Division Director Robert Khuzami. "While Countrywide told the world that it was prudently underwriting these mortgages, Mozilo believed that the risks of these products were so high that he quietly urged the company to sell assets."

Mozilo was also charged with insider trading for selling his Countrywide stock in 2006 and 2007 for nearly $140 million in profits at the same time as he was publicly promoting the mortgage company when he privately knew the company was struggling.

Khuzami said Mozilo and the two other executives were charged with securities fraud for failing to disclose the firm's relaxed lending standards in its 2006 annual report. Khuzami said the executives were responsible for disclosing any concerns they might have in a section of the company's annual report entitled Management Discussion and Analysis.


According to Khuzami, Mozilo said privately to insiders in a September, 2006, email that the company was "flying blind," referring to the performance of the company's Pay-Option ARM loan, at the same time as he publicly promoted the company.

Mozilo was the founder, chairman of the board, and CEO of residential mortgage banking company Countrywide Financial Corp. until July 1, 2008. The company is considered to be a key contributor to the financial crisis because of Countrywide's policy of providing so-called sub-prime mortgages to individuals or families with little income

Countrywide was acquired by Bank of America in July 2008 for $4.1 billion.

Countrywide has also been the subject of lawsuits. In August 2008, Connecticut Attorney General Richard Blumenthal charged Countrywide with deceptive lending practices to Connecticut borrowers.

Many Countrywide loans, including sub-prime mortgages, were packaged and sold to larger investors in the U.S. and Europe as mortgage-backed securities, expanding the credit crisis of 2008 and 2009.

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