UPDATE 1-NY expands Countrywide suit with more defendants

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Joan Gralla

NEW YORK, Jan 25 (Reuters) -New York City and state on Friday expanded a shareholder class-action law suit filed against top U.S. mortgage lender Countrywide Financial Corp CFC.N, naming additional company officers and directors, 26 underwriters and two accounting firms as defendants.

"We will pursue every avenue to ensure that those who defrauded investors are held accountable for their actions," said New York City Comptroller William Thompson, who helps run the New York City Pension Funds.

Executives of Countrywide "cashed out to the tune of almost $700 million" while borrowers lost homes and the value of investors' shares fell sharply, Thompson said in a statement.

Thompson and New York state Comptroller Thomas DiNapoli, who oversees the New York State Common Retirement Fund, jointly announced the expansion of the lawsuit.

The New York City and state pensions in November were named as co-lead plaintiffs for the five class-action suits accusing Countrywide of inflating earnings and overstating its ability to weather the housing slump.

The two accounting firms added to the suit, which seeks to recover millions of dollars, are Grant Thornton LLP and KPMG LLP.

A Countrywide spokeswoman had no immediate comment.