LOS ANGELES (Reuters) - Countrywide Financial Corp CFC.N Chief Executive Angelo Mozilo has been sued by a pension fund that accused the largest U.S. mortgage lender of helping executives pocket improper gains by artificially inflating its stock price through share buybacks.
The New England Teamsters & Trucking Industry Pension Fund accused Mozilo, other Countrywide executives and the company’s board of directors of gross mismanagement for improperly using $2 billion of cash to repurchase stock.
It said the move allowed executives to sell $842 million of Countrywide shares at artificially high prices between April 2004 and October 2007, at the expense of ordinary shareholders.
Countrywide had no immediate comment on the lawsuit.
The lawsuit, filed Monday in Los Angeles Superior Court, cited news reports that insider share sales at Countrywide reached a 5-year peak in March 2007, four months before the company posted a 33 percent drop in second-quarter earnings and slashed its full-year earnings forecast.
On Oct. 26, Countrywide posted a $1.2 billion third-quarter loss, but projected a fourth-quarter profit. The company’s shares have fallen by about 60 percent so far this year.
Calabasas, California-based Countrywide is at the center of the subprime mortgage meltdown in which rising interest rates have forced tens of thousands of homeowners nationwide to default on adjustable-rate mortgages.
The shareholder derivative lawsuit was filed by securities class-action specialist Coughlin Stoia Geller Rudman & Robbins. Shareholder derivative actions allow a shareholder to bring claims of mismanagement on behalf of the company.
The pension fund said it owns more than 125,000 Countrywide shares, and has been a stockholder since 1997.
In addition to Mozilo, the lawsuit names President and Chief Operating Officer David Sambol; Executive Managing Directors Carlos Garcia, Ranjit Kripalani and Andrew Gissinger III; Chief Legal Officer Sandor Samuels and Chief Financial Officer Eric Sieracki.
It also names board members Oscar Robertson, Michael Dougherty, Robert Donato, Jeffrey Cunningham, Harley Snyder, Martin Melone, Keith Russell, Robert Parry and former directors Stanford Kurland, Ben Enis, Edwin Heller, Henry Cisneros, Kathleen Brown, as well as Countrywide’s auditor KPMG.