Countrywide ex-CEO Mozilo must face SEC fraud case

By Jonathan Stempel and Gina Keating

NEW YORK/LOS ANGELES (Reuters) - A federal judge rejected a request by Angelo Mozilo, the former chief executive of mortgage lender Countrywide Financial Corp, to dismiss a U.S. Securities and Exchange Commission lawsuit accusing him of securities fraud and insider trading.

In a Tuesday court filing, U.S. District Judge John Walter in Los Angeles also rejected requests by David Sambol and Eric Sieracki, respectively Countrywide's former chief operating officer and former chief financial officer, to dismiss related SEC fraud charges.

Countrywide had been the largest U.S. mortgage lender before liquidity dried up in summer of 2007, leading to its acquisition the following year by Bank of America Corp for $2.5 billion.

Mozilo's lawyer David Siegel called the court's order "disappointing" but added he was confident Mozilo "will be vindicated once the complete record is presented to the court ..."

"Angelo Mozilo is an innocent man who helped millions of people find a home for more than 40 years," Siegel said in a statement.

Walter Brown, who represents Sambol, declined to comment. Nicolas Morgan, who represents Sieracki, also did not immediately return a call.

The SEC sued the defendants in June, accusing them of misleading investors about the quality of Countrywide's loans, including tens of billions of dollars of risky subprime and adjustable-rate mortgages.

"The specific allegations of the complaint relied on by the SEC describe in great detail the virtual abandonment of prudent underwriting guidelines and the resulting proliferation of poor quality loans, during the same period Countrywide was touting the superior quality of its underwriting guidelines and its loan portfolio," the judge wrote.