Countrywide Financial Corp. agreed to pay $600 million to settle shareholder lawsuits in the largest payout so far from the mortgage meltdown.
The settlement would end several class-action lawsuits that claimed Countrywide concealed mounting risks as it loosened its standards for loans during the housing boom. It also would clear former executives and financial firms that underwrote Countrywide stock and were named in the class-action suits.
"It is the largest settlement of any shareholder case to come out of the subprime crisis this far," says Joel Bernstein, attorney for the New York state and city pension funds that were the lead plaintiffs.
U.S. District Judge Mariana Pfaelzer in Los Angeles yesterday gave preliminary approval to the agreement, in which the defendants admitted no wrongdoing.
Countrywide Financial, once the nation's largest mortgage lender, was acquired by Bank of America Corp. in 2008.
Former CEO Angele Mozilo, former President David Sambol, former CFO Eric Sieracki and former board members were named in the litigation.
The company is being investigated by the Securities and Exchange Commission, which filed a lawsuit accusing Mozilo, Sambol and Sieracki of misleading investors.
Countrywide's accounting firm, KPMG, which signed off on the lender's financial statements from 2005 to 2006, agreed to pay an additional $24 million as part of the settlement.
The company and Mozilo also are under criminal investigation by the Justice Department and the attorneys general of California. Other states also have sued on behalf of borrowers. In Illinois, for example, Attorney General Lisa Madigan's office sued Countrywide last month for allegedly using discriminatory lending practices for minority borrowers - violations of the Illinois Human Rights Act and the Illinois Fairness in Lending Act, see story.