Mozilo Charged with Fraud
As we noted last month, The Man with a Tan was charged with Fraud.
Former Countrywide Financial Corp. Chief Executive Officer Angelo Mozilo and two other people were accused of fraud by the U.S. Securities and Exchange Commission following an investigation of the firm’s role in the subprime mortgage crisis.
The agency will hold a press conference at 4 p.m. today in Washington to discuss the case, it said in a statement. The SEC may accuse Mozilo of withholding information from investors about the mortgage lender’s condition and selling shares based on inside information to avoid losses, people familiar with the matter said, requesting anonymity because the case isn’t public.
Mozilo, 70, is the most prominent executive targeted by U.S. regulators examining the subprime mortgage crisis. In April, the SEC reached a $2.45 million settlement with Michael Strauss, the former CEO of American Home Mortgage Investment Corp., over claims he understated loss reserves before the Melville, New York-based lender’s bankruptcy.
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Source:
Countrywide’s Mozilo, Two Ex-Executives Accused by SEC of Fraud
David Scheer and Karen Gullo
Bloomberg, June 4 2009
http://www.bloomberg.com/apps/news?pid=20601087&sid=al4QWAr2aHCs
June 4th, 2009 at 4:22 pm
QUESTION: Who’s a good litigating, securities attorney, specializing in ‘Private Placement”? I’m working on a $10-$20 million suit.
Ned
June 4th, 2009 at 4:28 pm
I hope he gets himself a real friendly cell mate.
June 4th, 2009 at 4:31 pm
Bah! Wake me up when he and many others are charged criminally and convicted in court. So he’ll pay his piddly little fine and still walk off with his hundreds of millions? Was all worth it to him. Just a small flesh wound.
June 4th, 2009 at 5:04 pm
Worst case is that he spends 6 months in some “country club” prison.
June 4th, 2009 at 5:12 pm
@DL: With a tanning bed (or least the cheesey tanning cream) in there, I’m sure.
June 4th, 2009 at 5:24 pm
sad- I always liked the guy
June 4th, 2009 at 5:30 pm
OT…but got to talk with my banker this afternoon…I’ll give you a little update.
Remember the 1.8 million FDIC assessment for this year (good bank, no tarp, makes money)…well, they’ve lowered the assessent to 1.4 this year with the proviso that 450k may be assessed in the third AND the fourth quarters, although the FDIC wouldn’t be specific.
He talked with some enterprising folks from in town, who bought 4 houses in Knoxville last week from xxxxxx bank, and each of the banks had been foreclosed with outstanding mortages of over 1 million on each…the 4 investors got the 4 houses for a total of 1.2 million.
He bid on some loan pools offered by the FDIC last week…52 million dollars of mortgages, and only offered to FDIC institutions…(he thought this was a little unusual, why I don’t know)…apparently the average bid was 42% of the value of each mortgage, he thinks that they won’t get any of the loans up for bid, as he didn’t bid 42% on ANY of my bank’s submitted bids.
My wife says supper, and she must be obeyed…maybe I can give you some more details later…suffice it to say, he is of the opinion there is no way the recession ends this year…and I’ll try to give reasons later.
B in T
June 4th, 2009 at 5:38 pm
It’d be nice to blame Mozilo for the mortgage mess, hang him, and move on. But things are more complicated than that. And really, the SEC is the lamest agency on the planet. (Ban short-selling, but not option trading–that’s all you need to know) How is it fraudulent to NOT say the company you are running is going down the tubes? I didn’t hear anyone from Bear Stears, AIG, Lehman, Washington Mutual, Wachovia, etc., come on the airwaves and say, “you should sell our stock now because we are about to fail” yet none of their former CEO’s are being dragged by the inquisitors before the bar of American stupidity to have their heads hoisted upon a pitard (that’s gotta set a record for mixed metaphors, but I kinda like it).
Mozilo is not the enemy. The enemy is stupidity as embodied by the very agency that seeks to prosecute him.
June 4th, 2009 at 5:42 pm
“The SEC may accuse Mozilo of withholding information from investors about the mortgage lender’s condition and selling shares based on inside information to avoid losses”
Yippee!! Score one for the little guy!! Really, how many U.S. companies exist where the SEC could level the same charges? What Mozilo “may” be accused of is just routine business practice in today’s America and around the world. The SEC’s potential actions mean nothing, squat, zero, nada, zip…..it’s all part of the charade to appease those calling for Mozilo’s head. Like BB yesterday jawboning about how the FED has to be vigilant about inflation, blah, blah, blah…..it’s all pipe dreams.
June 4th, 2009 at 5:44 pm
Pat G Says-
“Really, how many U.S. companies exist where the SEC could level the same charges?”
Bazillions?
June 4th, 2009 at 5:46 pm
Exactly right Pat G. It’s laughable. Every one of these bank CEOs should be up on the same charges, that’s for sure. I despise Mozilo, for sure. But he should have a lot of company in the court room. And there are plenty of govt officials who flatly lied their asses off through this and are still doing so.
June 4th, 2009 at 6:02 pm
@ahab
That number sounds about right. lol
@Onlooker
If they prosecuted just 1/2 of those guilty of Mozilo- like actions, the court rooms/systems in this country would be full and busy for the foreseeable future.
June 4th, 2009 at 6:17 pm
to put on the dartboard
http://4.bp.blogspot.com/_cbYqJ1KCdDc/RwUz2BEkuAI/AAAAAAAAABk/iq5qRL7npqg/s320/angelo_mozilo.jpg
June 4th, 2009 at 6:36 pm
Ah fuck! Do I even have to hear this ass-hat’s name again. Can I tell you how many times (back when I was a nubie), bought a bunch of puts and this ass-hole, somehow would be buying Countrywide stock??? Crooks, as someone above mentioned is right, and why we can’t get better “transparancy,” is beyond me, I guess. But the truth is the financial system would be too boring, and the insiders from Wall Street, to Goldman, Barclays wouldn’t be able to make enough easy money. Who’s kidding who here.
June 4th, 2009 at 6:54 pm
@Pat G. Says:June 4th, 2009 at 5:42 pm
Bingo !
Bring Me the Head of Alfredo Garcia (1974)
Directed by Sam Peckinpah
Bring Me the Heads of 19 too big too fail banks (???)
Directed by Obama ( get real – not going to happen )
June 4th, 2009 at 7:08 pm
Maybe he pays a $50 fine?
I feel like this entire nation had a bunch of overdue bills… got tired of the bill collectors calling and took a $10,000 cash advance from our last credit card (aka printing money)… Paid off those pesky bills and now we are free and clear for the next 3 weeks until that statement comes in the mail….
June 4th, 2009 at 7:16 pm
So now that we see the huge fraud, are you still against any and all government intervention in the economic crisis?
June 4th, 2009 at 7:19 pm
I think the USG is targeting Italians- that’s what I think-
racist bastards
June 4th, 2009 at 7:32 pm
@thetanman
dude – you’re going to have to change your “handle”, or you might start to be accused of being guilty by association
June 4th, 2009 at 7:34 pm
thetanman is Mozillo?
June 4th, 2009 at 7:38 pm
I predict the total number of convictions will be similar to those of the dot com fraudvestment era, about 6. Or or put another way, one per trillion dollars of fraud. That’s an acceptable risk vs reward ratio for the criminally inclined CEO.
June 4th, 2009 at 7:42 pm
stillaway-
excellent point- and probably correct- unless the Obama administration takes a much more aggressive stance- not a fan so far- but if he can do that- he would earn some respect
June 4th, 2009 at 8:50 pm
Civil action. No time.
“Behind every great fortune there is a great crime” – Balzac
June 4th, 2009 at 8:51 pm
I’m still laughing over this…
Geithner faces sluggish market, can’t sell home
http://www.ritholtz.com/blog/2009/06/sign-o-the-times-geithner-rents-home-out/
He paid $1.602 million for the home in 2004 or roughly at peak of RE market
Yes folks this is our Treasury Secretary
June 4th, 2009 at 8:52 pm
When I hear “Angelo Mozilo” it brings big smile to my face.
I shoted CFC and made lots of money. I can smell crooks/liers/a$$ Oles from miles away, and he was one of them.
June 4th, 2009 at 8:53 pm
What laws were broken? If any, why no criminal charges? Let’s be realistic here instead of just angry. Mozilo will not be criminally charged, this litigation will be either tied up for several years and he’ll walk away or he’ll settle for $10 – $15 million. If the SEC prosecutes Mozilo, Sambol, or Sieracki criminally they would lose and have to began to prosecute hundreds of bank execs. These people (bankers) wrote the laws; that is why they rarely suffer the consequences of their actions, they have insulated themselves.
Regards,
TDL
June 4th, 2009 at 8:54 pm
And Geithner is point man for negotiating with China
More Tsing Tao please
June 4th, 2009 at 8:56 pm
you mean the Treasury Sec’s job requirements include market timing?
June 4th, 2009 at 8:58 pm
No WSS, We would have expected much better judgment/wisdom from Treasury Sec.
June 4th, 2009 at 9:01 pm
…OK…instead of Timmy timing the market
let’s have Helicopter Ben manipulate the market
imagine what they could do if they coordinated their efforts (w/Lloyd, of course)?
June 4th, 2009 at 9:08 pm
@Wes Schott Says:June 4th, 2009 at 8:56 pm
you mean the Treasury Sec’s job requirements include market timing?
********************
Yes of course buy high sell low…right
June 4th, 2009 at 9:13 pm
i am going to check out some green shoots, be right back
June 4th, 2009 at 9:13 pm
Market Valuation Update:
Based on analysts estimates, the P/E on 2010 earnings is currently 27. The interesting thing is that forward P/Es are usually lower than current P/Es and that P/E of 27 is greater than anytime since 1926, excluding the tech mania. Is it really wise to pay that exorbitant price during such an uncertain time? It could be asinine. You are betting that analysts are waaaay too conservative. But the low volume run continues away and II Bulls are at 5 year highs.
http://www.investorsintelligence.com/x/free_chart.html?r=101#
June 4th, 2009 at 9:24 pm
So if all goes according to the recovery predictions, in a year and a half, stocks would just be getting to insane valuation, down from unimaginable, if they just stay where they are today. WOW…you must be nuts to be long the index now…certifiably nuts.
June 4th, 2009 at 9:36 pm
….green shoots are good…
P/E 10 @ market bottoms
earnings? $33 per share => SP 333 = 1/2 the sign of the Father of Rosemary’s Baby
June 4th, 2009 at 9:40 pm
Steve Barry @ 9:24
“…you must be nuts to be long the index now…”
Maybe it’s “nuts” to “buy and hold”; maybe it isn’t.
But being long at selected times can be reasonable as part of a trading strategy. For example, buying the SPX when it drops to the lower end of its recent trend channel (since about 3/25/09), and selling it when it gets to the upper end could make sense as long as a stop-loss discipline is maintained.
June 4th, 2009 at 9:47 pm
Steve, great way to work your tenacious valuation thesis into a thread on Mozilo. Here is my problem with your argument. You use words like “exorbitant”, “asinine”, “insane”, and “nuts” to characterize valuations and why someone shouldn’t go long. I concur, but it seems to me that the market has been systematically exorbitant, asinine, insane, and nuts for a long time. Even at the 666 low, the stock market was a fat and happy little pig. Valuations never overshot to the downside for a real man’s 3 -5 type P/E…the Fed and Treasury never allowed it.
So, shouldn’t investors just accept that the market is completely deranged and Uncle Sam is there to support its ongoing lunacy?
June 4th, 2009 at 9:52 pm
“So, shouldn’t investors just accept that the market is completely deranged and Uncle Sam is there to support its ongoing lunacy?”
That’s more or less my view of it as well.
June 4th, 2009 at 9:59 pm
“So, shouldn’t investors just accept that the market is completely deranged and Uncle Sam is there to support its ongoing lunacy?”
I will never accept it. A manipulated market will eventually be worthless. If Uncle Sam is doing it, he is borrowing the money and eventually the debt service will crush us, if the spigots are not cut off first by our creditors.
June 4th, 2009 at 10:34 pm
Steve, I would like to agree but the creditors won’t cut us off because they too need to maintain the illusion plus we can buy our own debt (amazing). Until there is decoupling, there is no accountability. Because of political constraints here, in China, and elsewhere, we are building up the global economic system of imbalances, deficits, and debt into an even more enormous snowball such that only a total meltdown with massive currency repricing will restore sanity to economies and markets.
Or do you see a more controlled reckoning and restoration of rational markets that is less unpleasant?
June 4th, 2009 at 10:44 pm
@CNBC:
Damned if I know…I thought the meltdown was underway already and the worst would occur. Unless they magically turn around housing at a 15% premium to past all-time Case Shiller highs, I don’t know how they can stop it.
June 4th, 2009 at 10:59 pm
As we all know, the 1970’s was a disaster for stocks, even in nominal terms. But even in that decade, there were impressive rallies. For example, beginning in May of 1970, the SPX rose 70% over 30 months (in nominal terms).
Who’s to say that we can’t get to SPX 1100 by 2011…?
June 4th, 2009 at 11:13 pm
@DL:
At this point nothing would shock me…just remember the highest P/E in the 70’s was 19 and the low was 7. That P/E of 7 was seen again in 1980 and was the birth of the biggest bull ever. Can a new bull start at a P/E of 130? It seems laughable….and an incredibly bad bet.
June 4th, 2009 at 11:26 pm
Market Valuation Update:
Based on analysts estimates, the P/E on 2010 earnings is currently 27. The interesting thing is that forward P/Es are usually lower than current P/Es and that P/E of 27 is greater than anytime since 1926, excluding the tech mania. Is it really wise to pay that exorbitant price during such an uncertain time? It could be asinine. You are betting that analysts are waaaay too conservative. But the low volume run continues away and II Bulls are at 5 year highs.
http://www.investorsintelligence.com/x/free_chart.html?r=101#
# Steve Barry Says:
June 4th, 2009 at 9:24 pm
So if all goes according to the recovery predictions, in a year and a half, stocks would just be getting to insane valuation, down from unimaginable, if they just stay where they are today. WOW…you must be nuts to be long the index now…certifiably nuts.
OK, last try here with respect to this market valuation issue. I would highly suggest taking the time to read this paper thoroughly
https://www.gmo.com/America/CMSAttachmentDownload.aspx?target=JUBRxi51IIDcqoAT4ld7GPO7GF6IGfwo%2bHPBzD1E18oL0X1VVkcC%2fXQyiM3sGUzsBrupkaYtbeQk6jNnxqt%2fnTYamB9TEn5xMeUPrWVw0638JZOSavXY9JShRWyYRqCK
The Duration of Stocks
The first thing to recognize about equities is where their
value comes from. Stocks are worth the present value
of the future cash flows they will deliver to their owners.
Since stocks do not have an expiration date and dividends
grow over time, the duration of stocks is extremely long.
If we assume that half of the return from stocks in a given
year comes from the dividends and half from the growth
in dividends, most of the value of stocks comes from cash
flows in the distant future.
The present value of stocks doesn’t come from their temporarily depressed 09 and 10 earnings. Someone else made this point about cyclicals the other day.
Hussman was quoted the other day in the context of the Fed model, and I think his argument is correct but there is another point of view as well. Back to GMO
https://www.gmo.com/America/CMSAttachmentDownload.aspx?target=JUBRxi51IIBkzeMN6maT8U1%2fTdfZFUgg1mR%2b%2f01QLADkc%2bteJzsR%2bVfcC%2fSC%2btuA%2fvERm%2f47EsGV8Aeo3YQwhCgYpJJIz2rK%2fXue%2bib4lzo%3d
One group
(the U.K. and the U.S. in 1974 and the U.S. in 1982) had
very high interest rates providing formidable short-term
competition with stocks. (In the long term, the Fed Model
logic is simply false, but in the short term – up to a year –
it does work for behavioral reasons.) These markets also
had very high inflation, which in the short to intermediate
term has a compelling explanatory power for P/E ratios.
To keep it simple, high infl ation rates typically come
with lower than average P/Es and vice versa. A third
factor in all three cases was a crisis in oil supply and the
accompanying much higher oil prices. So without these
extra negative factors, the current market seems unlikely
to overcorrect below fair value quite as badly as these
prior bear markets have.
BTW, Grantham who is hardly some bullish cheerleader has fair value around 900.
What does Hussman say on valuation:
http://www.hussman.net/wmc/wmc090601.htm
From a valuation perspective, stocks are slightly overvalued except on the basis of earnings-based metrics that assume a quick return to 2007 profit margins. Stocks are not richly priced, but they are no longer compressed in valuation.
Not richly priced, and again if you look at Hussman’s record he has hardly been a bullish cheerleader.
Frankly, I hope we do go back and retest 700ish because I’m still 50% in cash and I’d like to deploy more cash in stocks for the long-term and I’m not comfortable adding here even though many technicals are turning very positive (Coppock curve, breadth, 200 DMA breakout, is 50DMA/200DMA crossover around the corner).
If we do go back down and retest, might be wise to take some bearish position chips off the table next time. S&P 400-500 is just very unlikely I think for all the reasons outlined in the GMO notes.
June 4th, 2009 at 11:48 pm
Mozilo. Sort of reminds me of one those lawyer jokes. !! Disclaimer !! “many lawyers are people of great integrity and intellect and many of my best friends are lawyers” (of course there’s some small number of lawyers who are considerable schmucks or worse).
Now with that out of the way.
What do you call a lawyer at the bottom of the sea?
A good start.
And @Stever Barry and @CNBC Sucks, I googled and I’m surprised: these particular famous words from Keynes (as best I can tell in a very quick search) may not yet have been recorded on The Big Picture (surely I’m wrong?)
“The market can stay irrational longer than you can stay solvent”
Keynes’ record as an investor (for a Cambridge Univ fund) – and in a time period stretching over the Great Depression – is very impressive.
June 4th, 2009 at 11:59 pm
Do hope Mr. Mozilo is home by the 4th. We just RSVP for his big get together up in Southhampton
June 5th, 2009 at 12:25 am
@Steve B — the only problem I have with historical P/E comps is how to relate them to the T-bill rates at the time. If a T-bill is paying 15%, then any DCF of future equity earnings needs to be discounted pretty significantly, and the P/E of the stock will be pretty low.
Today, given our low “risk free” rates, the expectation for P/Es would be for them to be quite a bit higher than in the early ’80s, right?
June 5th, 2009 at 1:14 am
Whammer
A person much smarter than me has an opinion or two on the so called “Fed model” that you’re referring to re: valuing stock based on interest rates. See Dr. Hussman’s article here:
http://www.hussmanfunds.com/wmc/wmc070820.htm
He’s written on this more than once so there is probably another article or two in his archives that address this issue.
June 5th, 2009 at 1:43 am
I think the USG is targeting Italians- that’s what I think-
Nope. People with tans.
Displaying tans is clear evidence of not being locked up in the office all day like the common man (although not this common man most fortunately) thus indicating a perk that will agitate the population. Thus ‘tanmen’ must be made an example of to keep the population satisfied the government is still doing something
June 5th, 2009 at 1:44 am
@Onlooker
Thanks very much, that is a fantastic article.
Once again, this demonstrates what a berry good blog/community this is indeed.
And it is also a reminder that I may need to park some more dinero with Dr. Hussman.
June 5th, 2009 at 3:27 am
Helloooooooo Ken Lewis!
Material Non-Disclosure, Conspiracy to Defraud, and a Fiduciary Breach with his pals Hank & Ben as unindicted co-consprirators on the Merrill deal.
June 5th, 2009 at 5:05 am
More suggestions of price fixing. Will they ever learn that nature has to take its course? Remember the old song “Bad, Bad Leroy Brown?” Don’t, pull the mask off the old Lone Ranger, don’t spit into the wind, don’t mess around with Jim. Let me add one more to that – don’t mess around with prices.
http://www.ft.com/cms/s/0/146d358c-5159-11de-84c3-00144feabdc0.html?referrer_id=yahoofinance&ft_ref=yahoo1&segid=03058
June 5th, 2009 at 6:27 am
Mozilo deserves to go to jail just for running those obnoxious, unethical, irritating Countrywide adds pumping mortgages.
You remember the ones (enter the sleezey huckster) touting how you can move into a house for no money down, with low monthly payments. Just call this 800 number and you’ll have your loan in 10 minutes.
Every time I saw one of these adds it made my blood boil, I told my wife these adds are a sign of things gone mad, this won’t end well.
As they say the rest is history.
June 5th, 2009 at 7:20 am
cvienne,
I have in mind Good Fellas without the iron bars. And please no Anthony Stabile, Franky Carbone, Moe Black’s brother Fat Andy, Frankie the Whop, Freddie No Nose, or Pete the Killer Sallie Balls’s brother. Maybe just a stenographer, and I don’t mean Rudolf Hess.