Angelo Mozilo: The Case In Favor Of Hanging

Angelo Mozilo, the former CEO of Countrywide, one of the firms at the center of the mortgage and credit crises, may settle fraud charges with the SEC. At issue is whether Mozilo and his lieutenants hid risky loans from investors and regulators. Mozilo sold $140 million in Countrywide shares during the period in question, which could be a basis for insider trading charges as well.

The Wall Street Journal reports that the SEC may be tempted to accept a settlement, which might involve a large fine and an agreement that Mozilo would be barred from the financial services industry. “Observers say a settlement also has attractions for the SEC, whose reputation has been battered over the past few years by its failure to do more to stem the 2008 financial crisis or to more quickly unearth some major fraud cases—-particularly the multibillion-dollar Ponzi scheme of Bernard Madoff,” the paper reports.

A settlement would also show that the SEC does not have the guts to take the matter to trial. Its settlement with Goldman Sachs for a modest $550 million fine and an agreement that the bank would “go and sin no more” raised the issue again of whether the SEC settles cases because it fears it will lose them in federal court. That does not say much about the foundation of the SEC’s charges against businesses and individuals. If the charges are compelling, the agency must believe that they have enough merits to be accepted by a judge, and perhaps a jury.

The Mozilo case probably will be settled. History is the best measure of future events. The SEC decided long ago that settlements are a quick and efficient route to push cases off of its desks. But, in Mozilo’s case, the infractions were so severe that the taxpayers who put money into bank bailouts and Countrywide shareholders and customers, should be allowed to see Mozilo hanged.

Douglas A. McIntyre