UPDATE 1-US preparing suit against Countrywide CEO - Bloomberg

Wed Aug 20, 2014 6:35pm EDT

(Adds comment from Mozilo's lawyer)

Aug 20 (Reuters) - The U.S. attorney's office in Los Angeles is preparing a lawsuit against Angelo Mozilo, the former chief executive of mortgage lender Countrywide Financial Corp, and up to 10 other employees, Bloomberg reported, citing two people with knowledge of the matter.

The U.S. government is using the Financial Institutions Reform, Recovery and Enforcement Act to sue Mozilo for his company's role in inflating the U.S housing bubble before the 2008 financial crisis, Bloomberg cited the people as saying. (bloom.bg/1vivmA9)

Mozilo in 2010 agreed to a settlement of $67.5 million to resolve charges of duping the company's investors while lining his own pockets.

Bank of America Corp, which bought Countrywide for $2.5 billion in 2008, had said it would pick up two-thirds of the tab. (reut.rs/1BDuuup)

While federal prosecutors have notified lawyers that their clients are targets of civil cases, any lawsuit may be more than a month away, Bloomberg reported, citing one of the people.

"There is no sound basis, in law or fact, for the government to bring a claim against Mr. Mozilo," David Siegel, Mozilo's lawyer, told Reuters in an email.

The Los Angeles U.S. attorney's office and Bank of America were not immediately available for comment. (Reporting by Ramkumar Iyer in Bangalore; Editing by Saumyadeb Chakrabarty)

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