Countrywide Financial Corp, acquired by Bank of America last year, has settled an investor lawsuit for $624 million. The Countrywide class action suit was brought by investors who purchased securities from Countrywide from 2004 to 2008. Many of the litigants in the Countrywide settlement held pension funds, including the New York State Common Retirement Fund. Bank of America is paying $600 million while auditor KPMG will pay the remaining $24 million to settle the suit.
While the Countrywide settlement is positive in that it will allow the parties to move on, Bank of America and Countrywide maintain they were not at fault. Bank of America spokeswoman Shirley Norton told Reuters in an interview that the bank agreed to the settlement to save legal costs and denied wrongdoing. Bank of America no longer uses the Countrywide name.
"This is a very good settlement that helps repair the damage Countrywide has done," New York State Comptroller Thomas DiNapoli, who oversees the Common Retirement Fund, said of the Countrywide class action settlement in a statement.
Countrywide and its high profile CEO, Angelo Mozilo, have been called the modern day Enron; another tale of hubris and greed. Countrywide once made 15% of all home loans. Countrywide was known for a number of high risk lending practices, including subprime and adjustable-rate mortgages which contributed to the financial crisis. Countrywide was purchased by Bank of America just before nearly going bankrupt. Bank of America bought Countrywide for $2.5 billion in 2009.
"This behavior is unacceptable in corporate America," said New York City Comptroller John Liu, who advises the five city pension funds in the case.
Former CEO Mozilo and two other former Countrywide executives remain defendants in a civil suit the SEC filed in 2009. The SEC alleges they misled investors while flouting insider trading laws. The Countrywide class action suit brought claims of lying to investors and insider trading.