Legal News

Criminal Probe of Countrywide Heating Up Out in L.A.

By Ashby Jones

With all eyes on Goldman Sachs, it might be easy enough to overlook an investigation that seems to have moved well past where we are in the Goldman matter. The subject of that investigation: Countrywide Financial Corp. (now owned by Bank of America).

Things seem to be heating up in the federal investigation of Countrywide and what brought on the company’s collapse. According to a WSJ story out on Monday by John Emshwiller, federal criminal investigators looking into the collapse of Countrywide have been calling witnesses before a grand jury, say people familiar with the matter. That step suggests, of course, that the investigation of the one-time mortgage giant, which has been continuing for about two years, could be moving closer to a resolution.

According to Emshwiller’s story, the grand jury began hearing witnesses on the Countrywide case late last year, though isn’t known which individuals the Countrywide grand jury here is looking at or what potential crimes are being investigated.

In the Countrywide criminal probe, the calling of witnesses before a grand jury doesn’t mean that charges will be filed. However, it does appear to signify a pick-up in the tempo of a probe that previously hadn’t appeared to be moving very quickly.

In the meantime, the SEC’s suit against former Countrywide executives rolls on. The suit asserts that the three men, including former CEO Angelo Mozilo (pictured), defrauded investors by falsely claiming that Countrywide underwrote low-risk mortgages at a time when the company was getting into increasingly risky parts of the lending business, including so-called “subprime” mortgages made to less creditworthy borrowers.

The SEC additionally accuses Mozilo of insider trading of Countrywide stock. A trial in the case is scheduled for October. All three defendants vehemently deny any wrongdoing and say they plan to fight the SEC charges.

Full post as published by Law Blog - WSJ.com on April 19, 2010 (boomark / email).