Judge: Countrywide Shareholders' Suit Can Proceed

BusinessWeek (05/15/08); Veiga, Alex
Several pension funds suing Countrywide Financial executives and directors over the mortgage lender's business practices will be able to bring their case to trial, following a May 14 ruling by a federal judge who declined to throw out the lawsuit. The Arkansas Teacher Retirement System, the Fire & Police Pension Association of Colorado, the Public Employees Retirement System of Mississippi and other shareholders are suing Chairman and CEO Angelo Mozilo and 13 other current and former top executives and board members for a lack of oversight of Countrywide and for deceiving them about the company's financial state. "Plaintiffs' allegations create a cogent and compelling inference that (Countrywide directors) misled the public with regard to the rigor of Countrywide's loan origination process, the quality of its loans, and the company's financial situation--even as they realized that Countrywide had virtually abandoned its own loan underwriting practices," U.S. District Judge Mariana Pfaelzer in Los Angeles wrote in her 61-page ruling. Countrywide argued that the failure to consistently hold stock in the company compromised the legal standing of the shareholders and, therefore, the lawsuit should be dismissed.