Footnoted.org laments the final 10Q Countrywide will ever file.
As usual, there’s plenty of insight, including the observation that the carrying value of Countrywide’s loans held for investment is $94.2bn. A loan book for which Bank of America - the new proud owner of the former mortgage giant - paid, of course, just $8.1bn.
Footnoted also points out the welter of lawsuits facing Countrywide. Fortunately, the 10Q has plenty of detail. We count - roughly - 39.
Four securities class action cases relating to equity and debt securities:
In re Countrywide Financial Corp. Securities Litigtion filed by certain New York state and municipal pension funds (”NY Funds“) ostensibly on behalf of purchasers of the Company’s common stock and certain other equity and debt securities
Argent Classic Convertible Arbitrage Fund L.P. v. Countrywide Financial Corp. et al. was filed ostensibly on behalf of purchasers of certain Series A and B debentures issued in various private placements pursuant to a May 16, 2007 offering memorandum.
Layne v. Countrywide Financial Corp: filed ostensibly on behalf of a putative class of participants in the Company’s 401(k) retirement plan whose retirement account contributions were voluntarily matched by the Company in the form of shares of Countrywide common stock. This case alleges misstatements in a May 11, 2007 registration statement that the Company filed with the SEC in connection with these shares.
Teratsonian v. Countrywide Financial Corp. et al. filed on behalf of a putative class of Countrywide employees who received Countrywide common stock under the Company’s 2006 equity incentive plan and alleges misstatements in an August 8, 2006 registration statement filed in connection with these shares. The alleged misstatements concern, among other things, the nature and quality of the Company’s loan underwriting practices and its financial results during the relevant period.
Two securities class actions relating to Countrywide’s public offering of mortgage-backed securities:
Luther v. Countrywide Home Loans Servicing LP, et al is ostensibly brought on behalf of a class of purchasers of certain mortgage pass-through certificates for which CWALT, Inc. and various issuing trusts filed registration statements.
Washington State Plumbing & Pipefitting Pension Trust v. Countrywide Financial Corporation, et al is ostensibly brought on behalf of purchasers of such CWALT, Inc. mortgage pass-through certificates, as well as various other mortgage-backed securities registered by certain other Company subsidiaries.
…Both lawsuits allege, among other things, that the mortgage loans underlying these securities were not originated in accordance with the underwriting guidelines and processes described in the prospectus supplements issued in connection with the sale of such securities. The complaints seek unspecified compensatory damages, among other relief. In addition, the Company may have indemnification obligations arising from other mortgage-backed securities transactions to the purchasers of those securities or to other parties.
Two shareholder derivative actions in California:
In re Countrywide Financial Corp. Derivative Litigation (Arkansas Teachers Retirement System)
In re Countrywide Financial Corp. Shareholder Derivative Litigation (Robert Garber)
…Both complaints allege, among other things, breaches of fiduciary duty by Company officers and directors, and misstatements in certain SEC filings concerning the Company’s loan underwriting practices, financial condition and prospects.
A consolidated shareholder derivative action in Delaware:
In re Countrywide Financial Corp. Derivative Litigation (International Brotherhood of Electrical Workers) The complaint alleges that certain Company officers and directors breached their fiduciary duty by causing the Company to repurchase its stock at allegedly inflated prices in late 2006 and the spring of 2007.
A shareholder derivative action in the Delaware Court of Chancery:
Seymour v. Samuels, et al. has been filed ostensibly on behalf of Countrywide Capital V (”CCV”), a Delaware trust, against the Company and certain other defendants by an alleged purchaser of CCV preferred trust securities. The complaint alleges that CCV was harmed when it purchased certain debentures from the Company whose value the complaint claims the Company had artificially inflated. The Company intends to ask the Court to dismiss this matter on various grounds.
Freddie Mac and Fannie Mae (on behalf of) suing in NYC and DC:
Bassman v. Syron, et. al (FRE)
Agnes v. Raines, et al (FNM)
…These complaints allege, among other things, that the Company sold loans to these government-sponsored entities that had not been properly appraised and that the Company misrepresented the appraised value of the loans it sold in the secondary mortgage market. The Company intends to ask the courts in these matters to dismiss them on various grounds.
Eighteen class action complaints for violations of the Employee Retirement Income Security Act (ERISA) in California:
The complaints principally contend that it was not prudent for the Company to permit employees participating in the Countrywide 401(k) retirement plan to continue to invest in the Company’s common stock during a roughly two year period ending in September 2007. The Court has stayed all but the first-filed ERISA class action case (entitled Alvidres v. Countrywide Financial Corp., et al.).
One indenture trustee suit:
The Company has been named as a defendant in a case filed in the Delaware Court of Chancery by the Bank of New York Mellon in its capacity as indenture trustee with respect to certain Series B floating rate convertible senior debentures due 2037 having a principal amount of $2 billion. The complaint alleges, among other things, that the Company’s merger with Bank of America constituted a “Fundamental Change” which allegedly requires the Company to repurchase such of the debentures.
“Various” (three?) class action lawsuits and claims relating to Countrywide’s merger with Bank of America:
…filed against the Company and other defendants in Los Angeles Superior Court, the U.S. District Court for the Central District of California, and the Delaware Court of Chancery on behalf of a putative class of all Countrywide shareholders. These lawsuits allege, among other things, that the Company’s directors breached their fiduciary duties by entering into the merger agreement with Bank of America. The merger-related claims in the California courts have been stayed in favor of the Delaware litigation (entitled In re Countrywide Financial Corp. Shareholder Litigation), which has been settled in principle. The proposed settlement is subject to court approval.
And finally, (five?) lawsuits from “various state attorneys general”:
Lawsuits brought by the state attorneys general of California, Connecticut, Florida and Illinois in their respective state courts. These lawsuits allege, among other things, that the Company violated state consumer protection laws by allegedly engaging in deceptive marketing practices designed to increase the volume of loans it originated and then sold into the secondary market. These lawsuits seek, among other remedies, monetary penalties and, in the Connecticut and Illinois actions, rescission or repurchase of mortgage loans made to Connecticut and Illinois consumers and in the Illinois action an injunction against foreclosure proceedings in certain circumstances. The Director of the Washington State Department of Financial Institutions also has commenced an administrative proceeding against the Company alleging, among other things, that the Company did not provide borrowers with certain required disclosures and that the loan products made available to Washington borrowers of protected races or ethnicities were less favorable than those the Company made available to other, similarly situated borrowers. This proceeding seeks, among other things, a monetary fine and an order barring the Company from making consumer loans in the State for five years.
And several investigations by government agencies, including, the SEC, (potentially) the FBI, the DOJ, and the Federal Trade Commission.
One final - non lawsuit-related - quirk, spotted by Footnoted:
Angelo Mozilo’s name was nowhere to be found in Countrywide’s last Q. Talk about the end of an era!
Related links
Countrywide faces legal row - FT
BofA’s earnings bolster sentiment - FT
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