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Kaplan Fox represents a court appointed class representative in the case against Countrywide.
Plaintiffs generally allege, among other matters, that Defendants violated securities laws by making false and misleading statements concerning Countrywide’s business as an issuer of residential mortgages, and regarding the creditworthiness of borrowers, underwriting and loan origination practices, loan loss and other accounting provisions, and by misrepresenting high risk low documentation loans as being "prime," violating generally accepted accounting principles (GAAP) and engaging in other false and misleading statements.
It is alleged that a material portion of the Company’s loans were made to individuals on a “no-documentation” or “low-documentation” basis, which means that Countrywide gave loans without requiring traditional paperwork, such as income and/or employment or asset verification. Such loans were referred to in the lending industry as “liar loans” because they invite applicants to inflate their stated income levels and/or assets to obtain credit. The Company reported such low-documentation loans as “prime” loans even when they were substantially riskier than traditional prime loans, while repeatedly (and falsely) touting Countrywide’s supposedly superior and more conservative approach to lending, an approach that, investors were assured, would allow Countrywide to prosper as weaker companies fell by the wayside.
While the price of Countrywide stock was artificially inflated by Defendants’ false representations, and before Countrywide’s stock price collapsed, insiders received $867 million from Countrywide stock sales, of which the Company’s CEO, Angelo R. Mozilo, received nearly $450 million.
In April 2010, the parties reached a settlement of $624 million. The settlement was given preliminary approval by the Court on August 2, 2010. The Court has set November 15, 2010 for a final settlement approval hearing.
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