Countrywide ordered to provide internal records

The Countrywide bank is seen in Lakewood, Colorado, September 11, 2007. Countrywide Financial Corp was ordered to turn over internal records to a pension fund that says the mortgage lender may have manipulated stock options granted to top executives.

NEW YORK (Reuters) - Countrywide Financial Corp CFC.N was ordered to turn over internal records to a pension fund that says the mortgage lender may have manipulated stock options granted to top executives.

The ruling, by Delaware Chancery Court Vice Chancellor John Noble, gives the Louisiana Municipal Police Employees' Retirement System limited access to Countrywide's books and records related to key executives' options awards.

The pension fund, a Countrywide shareholder, filed legal action in December 2006 seeking to inspect the documents, and the Delaware court held a trial to consider the matter.

The ruling, issued on Tuesday, does not address whether the mortgage lender's options award practices were improper. Instead, the judge said the pension fund provided enough evidence, based on an outside expert's statistical analysis of stock grants involving various companies, to permit a further review.

"The court is far from convinced on the basis of this record that any wrongdoing actually did occur at Countrywide with respect to the granting of executive stock options," the judge wrote.

However, "the court is not convinced, in light of all the evidence, that the analysis and methodology employed by LAMPERS' expert are so dubious that they have not at least raised a possible issue of corporate misconduct that warrants further inquiry."

Countrywide said in a statement it continues to believe the lawsuit "presented no credible evidence of wrongdoing relating to the purported manipulation of option grants."

It said it will continue to vigorously defend against the sorts of allegations that appeared in the complaint and any other similar claims.

Many companies have conducted internal investigations or are the subject of probes by the U.S. government to determine if they altered stock option grant dates to make awards more valuable for recipients. Investors have brought lawsuits against the companies in some cases.

The court also ordered Calabasas, California-based Countrywide to give the plaintiffs any information that the mortgage lender may have provided to the U.S. Securities and Exchange Commission, the New York Stock Exchange and the Department of Justice, related to any investigation into its option grants.

A lawyer for the plaintiffs, Jay Eisenhofer, said that what was unusual about the case was how hard Countrywide fought the request for the records.

He said it would now be up to the pension fund to decide what to do with the materials. But he said Countrywide, which has been hard hit by the U.S. meltdown in the market for home loans to high-risk borrowers, is facing much deeper problems than questions about options.

"Events have in some ways overtaken the initial request," he said. "Countrywide seems to be in a great deal more trouble than just this books and records request."

Countrywide has been struggling as rising defaults, lower home prices and tighter credit markets make it harder to arrange loans. It has said it could cut 12,000 jobs, or about one-fifth of its work force, by December.

It faces purported class-action suits filed by shareholders in federal court in California who contend that the company issued false and misleading statements to inflate its share price.

(Additional reporting by Lewis Krauskopf)