By Nate Raymond
NEW YORK (Reuters) – Former Countrywide Financial Corp CEO Angelo Mozilo and other executives will not face a U.S. Justice Department lawsuit for defrauding investors in mortgage-backed securities issued before the 2008 financial crisis, people familiar with the matter said on Friday.
Mozilo, 77, and others were recently informed by the Justice Department that they would not be the subject of a civil fraud case related to their roles at the mortgage lender in the run-up to the crisis, the sources said.
The decision came two years after the potential case against Mozilo came to light, amid criticism of the Justice Department for having failed to pursue charges against high-ranking executives linked to the mortgage meltdown.
“We are gratified by the decision of the Department of Justice to close its investigation without further litigation,” David Siegel, Mozilo’s lawyer, said in a statement.
Eric Sieracki, Countrywide’s former chief financial officer, has similarly been informed he will not be sued, according to his lawyer, Shirli Weiss.
Patrick Rodenbush, a spokesman for the Justice Department, declined comment. The news was first reported by Bloomberg News.
Countrywide, at one time the nation’s top mortgage company, collapsed under the weight of soured loans and was acquired for about $4 billion by Bank of America Corp in July 2008.
But with the acquisition came a series of lawsuits and regulatory investigations stemming from Countrywide’s role in the subprime mortgage crisis, for which Mozilo became one of the industry’s most recognizable names.
Bank of America agreed in 2014 to pay a record $16.65 billion to resolve government claims that it and companies including Countrywide that it had acquired misled investors into buying troubled mortgage-backed securities.
Mozilo agreed in 2010 to a $67.5 million settlement with the U.S. Securities and Exchange Commission, which had accused him of misleading investors about Countrywide’s health and risk-taking. Bank of America agreed to cover some of the payout.
The Justice Department later in 2011 shelved a criminal investigation of Mozilo. The more recent civil probe by the Justice Department was being handled out of the U.S. Attorney’s Office in Los Angeles.
The decision to not sue Mozilo came after a federal appeals court in New York last month overturned a $1.27 billion penalty against Bank of America and a former Countrywide executive, Rebecca Mairone, in a separate case over conduct at Countrywide.
(Reporting by Nate Raymond in New York, Editing by Bernard Orr and Mary Milliken)