The U.S. Securities and Exchange Commission's fraud case against Angelo Mozilo, the former chief executive officer of Countrywide Financial Corp., is heading to trial on Oct. 19 after a federal judge refused to dismiss the charges.
U.S. District Judge John Walter in Los Angeles on Sept. 16 rejected motions filed by Mozilo, the most prominent executive targeted by federal regulators over the subprime mortgage crisis, and two other defendants, Countrywide's former president David Sambol and former chief financial officer Eric Sieracki.
Walter said that the SEC had "raised genuine issues of material fact" that Countrywide's executives made false and misleading statements or omitted certain facts relating to its lending practices — in particular, expanding its underwriting guidelines and offering riskier pay option loans.
"Indeed, a reasonable investor is not required to pore through all prior transcripts of earnings calls, review hundreds of prospectus supplements filed by indirect subsidiaries, or 'connect the dots' in a company's various SEC filings," Walter wrote.
The "SEC has also presented evidence that Countrywide routinely ignored its official underwriting guidelines to such an extent that Countrywide would underwrite any loan it could sell into the secondary mortgage market," he said.
The judge also refused to throw out the insider trading claims against Mozilo.
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