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Today, the SEC released a statement regarding its move to file fraud charges against Angelo Mozilo, the former CEO of Countrywide.  He’s been accused of “deliberately misleading investors about significant credit risks that were taken in an effort to maintain the company’s market share”.  He’s also been charged with insider trading.

This is the first high level executive to face the consequences of and possibly be forced to take financial responsibility for his role in the current mortgage crisis.  He doesn’t stand alone in these charges, though.  Standing next to him will be the former COO and former Countrywide president, David Sambol and former CFO Eric Sieracki.  Their charges are similar to Mozilo’s.  In part, they’re accused of providing false assurances that Countrywide primarily held prime mortgages and weren’t as much at risk as other lenders that specialized in subprime mortgages.  This is surprising since any mortgage loan officer in this country can attest to Countrywide’s B-C side that specialized in…you guessed it: subprime mortgages.

Mozilo’s lawyer, David Siegel, told The Wall Street Journal that there was no fair basis for any of these charges and reiterated his client’s insistence that all sales were both legal and ethical.  Despite an email that was discovered, written by Mozilo to Sambo and other high level officers, he still claims his actions were ethical:

                … The 100% loan-to-value subprime product is “the most dangerous product in existence and there can be nothing more toxic and therefore requires that no deviation from guidelines be permitted irrespective of the
circumstances.”

Of course, we know those guidelines he speaks of were widely ignored and 100% LTV loans continued, even when potential homeowners had FICO scores in the 400-600 range.  What this boils down to is people were buying homes, with absolutely no money up front aside from the costs of the appraisals and possibly closing costs (which in total, probably amounted to less than $5,000 - if that much).  They could have been considered poor credit risks (any FICO score below 550 is considered poor by most lenders) and still could have purchased a house that they might not could have afforded.

For now, the SEC seems to be content with its big fish.  Whether or not further charges for other head honchos will surface remains to be seen.

Growing up in south Mississippi, you grow accustomed to nothing being a secret.  Just when you think you’ve managed to keep the cover on some interesting tidbit and are sure you’re the only one privy to some enticing story, you realize everyone else, from the state line of Alabama to the state line of Louisiana, is thinking the same thing you are: everyone thinks they know something no one else knows, only to find out everyone already knew.  Until today.

Turns out Gulfport’s mayor, Brent Warr, one of the most favorite politicians on the coast, has been indicted on sixteen federal charges, including conspiracy to defraud the federal government by lying to both FEMA and HUD to receive monies set aside for Hurricane Katrina victims. He and his wife, Laura, have both been indicted and each

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faces up to 210 years in prison and over $4 million dollars in fines.  Here’s the shocker: no one knew.  No one was aware they were even due in court for any reason today.  It wasn’t until the indictment was opened and read in the U.S. District Court could you hear the gasps across the state.  They both have pleaded innocent in the presence of their lawyer.

Gulfport Mayor Brent Warr

They’ve been accused of taking money earmarked for residents whose primary residences were damaged and needed financial assistance to restore their homes.  The home the Warrs’ claimed was indeed damaged.  It’s located directly on the beach and is a beautiful white mansion, complete with huge white columns, indicative of how homes were built in the late 1800s.  The problem, though, is that it wasn’t their primary residence and in fact, they weren’t even living in it.  His only statement, made today, reads, “This inquiry has been going on for more than a year now, and we hope and pray for a much faster resolution.  We have entered a plea of not guilty.  Out of respect for the justice system and the government, I will not speak further about the claim made against us.”  That’s interesting because he makes no mention of his neighbors and the citizens as a whole in Gulfport who didn’t have access to these kinds of funds, and in fact, many are still waiting for some kind of resolution to their own claims.  These are the same neighbors and citizens who elected him into office only a month before Katrina made landfall in August, 2005.  In fact, he was so popular that his name had been mentioned several times when a replacement for Senator Lott was being considered.  At the time, he said he wouldn’t be pursuing that option since he was so busy with the recovery effort on the coast.

The indictment reads:

Count 1:        Conspiracy to defraud the federal government by lying to FEMA and HUD to receive emergency disaster assistance funds for their beachfront mansion.

Count 2:        Fraud for filing a FEMA disaster claim in which they misrepresented 1814 Beach Drive as their home when Katrina hit.

Counts 3-6:   False statements about the beach home; specifically, filing a disaster assistance claim, signing a sworn statement that information in the FEMA claim was true, filing for a federal homeowners assistance grant from HUD, swearing in a statement to the Mississippi Development Authority that information in the grant application was true.

Maximum penalty on each count, counts 1-6: five years in prison, $250,000 fine.

Counts 7-8:   Theft of FEMA funds; theft of HUD funds.

Maximum penalty on each count, counts 7 and 8: 10 years in prison, $250,000 fine.

Counts 9-11:  Wire fraud for electronic transmissions from FEMA of $2,000, $2,358, and $5,200 from Sept. 15, 2005 through Nov. 29, 2005.

Count 12:       Mail fraud for $150,000 homeowners grant check on Jan. 19, 2007.

Counts 13-16:    Mail fraud against Lexington Insurance Co. regarding misrepresentations about personal property, alternate living expenses and the extent of renovations in relation to the beach home; misrepresentations resulted in checks Lexington mailed for $4,271.33, $29,526.31, $29,442.46 and $25,200, each representing a separate charge.

• Maximum penalty on each count, counts 9-16: 20 years in prison and $250,000 fine.

For now, the trial’s been set for April 6^th.