Bank of America’s (NYSE: BAC) Countrywide Financial Corp agreed to a $624 million settlement on Friday over a lawsuit that claimed the mortgage lender mislead investors about its lending methods. The deal was struck with the New York State Common Retirement Fund and five other New York City pension funds.
The settlement calls for Countrywide to payout $600 million, while KPMG, its former auditing company will pay $24 million. The settlement resolves a class-action lawsuit that covers investors that bought Countrywide stock from March 12, 2004 through March 7, 2008.
“Countrywide’s actions have improperly enriched executives at the expense of shareholders,” said City Comptroller John C. Liu, who serves as a trustee of four of the five City Public Pension Funds and is investment advisor to all five Funds. “This historic settlement sends a strong message that this behavior is unacceptable in Corporate America, and that management will be held accountable to shareholders, especially when they put self-interest before shareholders’ interests.”
Executives at Countrywide had been accused of misleading investors for their own benefit. The firm’s former CEO Angelo Mozilo is facing a civil lawsuit by the SEC, accusing him of insider trading that generated $139 million in profit.
Countrywide became well known for its risky lending practices when the housing market began to crack, exposing the lender and its practices. The lender was tittering on the brink of collapse in early 2008, before Bank of America decided to purchase the firm for $2.5 billion in July of that year.
