* Countrywide to pay $600 million, KPMG $24 million
* Several New York pension funds led lawsuit
* Ex-CEO Mozilo still faces SEC fraud lawsuit
* Bank of America shares dip
(Adds Bank of America and NYC Comptroller comments, updated
By Jonathan Stempel
NEW YORK, May 7 Countrywide Financial Corp, the
mortgage lender acquired by Bank of America Corp (BAC.N), has
agreed to a $624 million settlement of a lawsuit accusing it of
misleading investors about its lending practices.
Countrywide will pay $600 million and its former auditor
KPMG LLP will pay $24 million to resolve the class-action
litigation, which covers investors who bought the lender's
securities between March 12, 2004 and March 7, 2008.
The case was led by several pension funds, including the
New York State Common Retirement Fund, that state's $129.4
billion public pension fund, and five New York City pension
"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 in a
Bank of America spokeswoman Shirley Norton said that the
bank agreed to the settlement to avoid further costs and
uncertainty of litigation, and that Countrywide denied
KPMG spokesman George Ledwith confirmed the settlement,
Once the largest U.S. mortgage lender, Countrywide and its
long-time chief executive, Angelo Mozilo, became synonymous
with risky lending practices that helped fuel the U.S. housing
boom and subsequent bust.
Countrywide nearly collapsed as credit markets tightened,
before Bank of America agreed to buy it in January 2008. The
largest U.S. bank closed the $2.5 billion takeover that July.
In the lawsuit, the pension funds alleged that Countrywide,
Mozilo and other officials misled them about the company's
lending risks, including a large reliance on risky subprime and
"option" adjustable-rate mortgages to fuel rapid growth.
They said this contrasted with public assurances that
Countrywide would survive the nation's housing downturn.
"This behavior is unacceptable in corporate America," said
New York City Comptroller John Liu, who advises the five city
pension funds in the case.
Countrywide once made one in six U.S. home loans.
Mozilo, 71, and two other former Countrywide executives
remain defendants in a U.S. Securities and Exchange Commission
civil fraud lawsuit.
The SEC claimed Mozilo misled investors about Countrywide
loans and violated insider trading rules in generating a $139
million profit by exercising stock options in 2006 and 2007.
It said the exercises came after he admitted in an email to
colleagues that Countrywide was "flying blind" as to the
quality of the loans.
David Siegel, a lawyer for Mozilo, did not immediately
return a call and email seeking comment.
Bank of America dropped the Countrywide name a year ago.
The bank is based in Charlotte, North Carolina. Countrywide was
based in Calabasas, California.
The settlement requires approval by Judge Mariana Pfaelzer
in Los Angeles. The pension funds said the accord would be the
13th largest securities class-action settlement since federal
laws on private securities litigation were overhauled in 1995.
Shares of Bank of America fell 7 cents to $16.21 in
afternoon trading on the New York Stock Exchange.
The case is In re: Countrywide Financial Corp Securities
Litigation, U.S. District Court, Central District of
California, No. 07-05295.
(Reporting by Jonathan Stempel; Editing by Gerald E. McCormick
and Steve Orlofsky)