Another day, another corporate titan suffering from devastating amnesia
Another day, another corporate titan suffering from devastating amnesia. This time, the memory-loss patient is none other than Angelo Mozilo, the former CEO of Countrywide Financial.
Deposed in the landmark lawsuit between the monoline insurer MBIA and Countrywide/Bank of America, Mozilo professed not to know the difference between "verified" income and "stated" income. He also made some incredible remarks regarding his notorious "Friends of Angelo" lending program, in which, among others, political figures like North Dakota Senator Kent Conrad and Connecticut Senator Chris Dodd received Countrywide mortgages on highly advantageous terms just because they were tight with the CEO.
As chief of Countrywide, Mozilo headed the single most corrupt subprime mortgage lender in America during the period preceding the crisis. Charged with mass fraud and headed for trial in October of 2010, Mozilo and the SEC ultimately settled four days before opening arguments were set to begin in Los Angeles. Ultimately, Mozilo got away with no jail time, paying a $67.5 million settlement, $20 million of which was covered by Countrywide, which by then had been acquired by Bank of America, a major bailout recipient. Just in the years between 2000 and 2008, Mozilo made over half a billion dollars – $521.5 million, according to one corporate research firm.
If you were going to assign blame to any single person for the financial crisis, Angelo Mozilo would rank right up there with people like Lehman's idiot CEO Dick Fuld, deranged credit-default-swap peddler Joe Cassano of AIG's Financial Products unit, and deregulatory pioneers like Bob Rubin and Phil Gramm. Mozilo's role, however, was probably the single most shameful, as he represented the conscious decision of mortgage underwriters to abandon lending standards in order to claim ever-larger chunks of market share.
Mozilo was actually deposed last June in the MBIA lawsuit, but the Mozilo depo only just became public recently. In the suit, the insurer claimed to have been fraudulently induced to insure mortgages that did not conform to Countrywide's stated underwriting standards. The "Friends of Angelo" program was therefore highly relevant to the MBIA action, because Mozilo was apparently unilaterally approving loans for people who didn't meet underwriting guidelines simply because Mozilo knew them.
In the deposition, Mozilo, demonstrating admirable chutzpah, claimed that the "FOA" program (which he denied was organized – "it was not a program," he said, adding that people would just put things on his desk marked "FOA") was not just for the chairman of the Senate Banking Committee, but also for "taxi drivers" and other such ordinary folk:
Waiters, taxi drivers, limo drivers, stewardesses, gardeners – and I'd give them my card, and when they called, I put those loans into our underwriting system. My people decided to label "FOA." They were not friends. But it was business.
That the "business" also involved giving discounts of roughly $2,700 a year to Dodd and $10,000 a year to Conrad seems to be immaterial to Mozilo. In any case, in the deposition, he is asked about how the "Friends of Angelo" program worked. I'll add more to this later in the day, but to me this pair of passages is the money shot. Unfortunately, the names of the particular "friends" remain sealed by the court:
Q. Can you turn ahead to the document… dated April 6th, 2006… You say in that, in that request, you say: "Close the loan right away, and thank [REDACTED] for this business. He is a close, personal friend." Do you see that?
MR. SIEGEL: Hang on a second, Angelo, while I try to find this document.
THE WITNESS: Towards the end.
MR. SIEGEL: Oh, it's towards the end. Okay. Got it.
Q. Again, my question is: Do you see that you stated: "Close the loan right away, and thank [REDACTED] for this business. He is a close, personal friend"? Do you see that?
Q. And was that true?
MR. SIEGEL: Question's irrelevant.
THE WITNESS: A close friend, yeah.
So we've established that Mozilo is okaying loans for close friends. Does he bend at all to get the deal done? Read for yourselves:
Q. Okay. And in the e-mail that came to you, do you notice that it states, in the list of attributes, "Verified income is $5,848 versus 20,833 stated"? Do you see that?
THE WITNESS: I don't see that.
Q. It's the sixth line up, seventh line up from the bottom.
Q. Do you see that?
Q. What does that mean, "Verified income is 5,848 versus 20,833 stated"?
A. I don't know.
Q. Doesn't it mean that he said on his application he earns 20,833 per month, whereas all Countrywide could verify was 5,848?
A. I'm not sure.
Q. You don't know. Did you know at the time?
A. Did I know in 2006? I don't know what I knew in 2006.
Again, more on this coming later today, but this is pretty rich stuff. Angelo Mozilo, onetime CEO of America's biggest mortgage originator, is claiming that he didn't know the difference between verified and unverified income.
This raises obvious questions – like for instance, how did he know how to answer this email, if he didn't know what it meant – but again, the more amazing thing is the balls. Here's a guy who wrecked more lives than anyone else in America in the mortgage crisis, got to keep virtually all of his ill-gotten gains, didn't do a day in jail, and then, when sued, testifies that he doesn't remember anything. And that will probably turn out to be an effective strategy for him. Amazing stuff.
There's more in there on FOA to come . . .