Friday, October 15, 2010

test on floor

But Countrywide’s foray into subprime lending and other risky loans led to its downfall, and in early 2008, hobbled by mounting losses on loans, the company was purchased by Bank of America in a fire sale. Mr. Mozilo left the company shortly thereafter.

In its complaint filed in June 2009, the S.E.C. had accused Mr. Mozilo, Mr. Sambol and Mr. Sieracki of hiding from investors the growing risks in Countrywide’s operations. The complaint also contended that Mr. Mozilo and Mr. Sambol improperly generated profits on insider stock sales even as they were alerted to the company’s widening woes.

Mr. Mozilo was not present for the court hearing.

Mr. Mozilo’s trial had been widely anticipated because it represented one of the few public prosecutions of a case against a major participant in the mortgage crisis. Still, both the defense and the prosecution faced big risks if they lost at trial, legal experts said, and this may have propelled the recent negotiations to bring about the deal. The settlement was approved by John F. Walter, the federal judge overseeing the case.

Had the S.E.C. won the case, it would have helped the agency re-establish its reputation as an investor advocate, which was badly damaged by inaction in the years leading up to the Madoff Ponzi scheme and the mortgage debacle. A loss would have been another black eye for the S.E.C.

A victory would also have been crucial for Mr. Mozilo, who would be concerned that a criminal prosecution might follow a loss in the civil case.