NEW YORK– LAWFUEL – The US Litigation Newswire –Pursuant to Section 21(D)(a)(3)(A)(i) of the Securities Exchange Act of 1934 (the “Exchange Act”), Entwistle & Cappucci LLP (“Entwistle & Cappucci”) (http://www.entwistle-law.com), a prominent New York law firm with a specialty in complex securities litigation, and Susman Godfrey LLP (“Susman Godfrey”), a nationally prominent firm with a specialty in complex commercial litigation, hereby give notice that they have filed a class action complaint for violations of the federal securities laws and California state law against Countrywide Financial Corporation (“Countrywide” or the “Company”) (NYSE:CFC), Angelo R. Mozilo, David Sambol and Eric P. Sieracki in the United States District Court for the Central District of California, Western Division. The lawsuit is brought on behalf of all persons or entities who purchased Countrywide Financial Corporation Series A Floating Rate Convertible Senior Debentures Due 2037 (the “Series A Debentures”) and/or Countrywide Financial Corporation Series B Floating Rate Convertible Senior Debentures Due 2037 (the “Series B Debentures”) (collectively, the “Debentures”) from May 17, 2007 through and including August 9, 2007 (the “Class Period”). No class has yet been certified in this action.
The complaint alleges that the Defendants issued a series of materially false and misleading statements and omitted material facts concerning the Company’s lending practices and internal controls. In this regard, Countrywide allegedly misrepresented its position in the mortgage market by stating that the current downcycle in the housing market would actually place the Company in a “superior competitive position” based on the strength of its “capital liquidity positions, superior business model, and best in class workforce.” The complaint further alleges that the Defendants falsely assured investors that Countrywide employed exacting loan underwriting and origination practices to ensure creditworthiness of loan applicants; implemented internal controls to anticipate appropriate loan loss reserves for any negative changes in the credit and housing markets; and maintained actual reserves to adequately meet such market downturns. Moreover, the complaint alleges that the Company’s statements were materially false and misleading because Defendants, in fact: (i) did not follow Countrywide’s reportedly strict underwriting and loan-origination practices; (ii) made a material portion of the Company’s loans with little, if any, supporting documentation, such that Countrywide had no way of confirming the creditworthiness of many loan applicants; (iii) mischaracterized “low documentation” and “no documentation” loans as “prime loans;” (iv) failed to maintain adequate loan loss reserves; and (v) improperly attributed the Company’s growth to sound risk management programs, rather than the Company’s aggressive and risky loan origination practices. Thus, Countrywide’s actual lending practices and internal controls differed materially from the description of those practices in the Company’s Securities and Exchange Commission (“SEC”) filings, press releases and other public statements. The Defendants’ fraudulent statements and omissions concealed the Company’s deteriorating financial condition as a result of increased delinquencies and defaults on subprime loans, and allowed the Defendants to artificially inflate the price of its Debentures. Accordingly, the complaint alleges that the Defendants violated Sections 10(b) and 20(a) of the Exchange Act as well as California state law.
Beginning on July 24, 2007, investors began to learn the truth about Countrywide’s actual financial condition through a series of partial disclosures. Specifically, on July 24, 2007, Countrywide reported that as a result of “softening home prices . . . and [rising] delinquencies and defaults,” the Company was taking a $417 million impairment on its investments in “credit-sensitive retained interest. . . . attributable to accelerated increases in delinquency levels and increases in the estimates of future defaults and loss severities on the underlying loans.” In addition, Countrywide reported that the Company took a $181 million charge to its loan loss reserves in its “held-for-investment” portfolio as a result of increased loan defaults in the prime market, setting aside in total $292.9 million for loan losses for the quarter, compared to $61.9 million a year earlier. As a result of these disclosures, the Series A Debentures fell $1.06 per debenture, or 1.10%, to close at $95.31 per debenture on July 24, 2007. The Series B Debentures fell $1.07 per debenture, or 1.11%, to close at $95.31 per debenture on July 24, 2007.
On August 9, 2007, Countrywide issued an additional press release disclosing the Company’s potential-short-term liquidity issues, directly contradicting the Company’s earlier assurances. Specifically, the Company warned of disruptions in the debt and secondary mortgage market that would likely affect the Company’s short-term financial condition and earnings. Upon this disclosure, the Series A Debentures fell another $1.37 per debenture, or 1.48%, to close at $91.00 per debenture on August 10, 2007. The Series A Debentures continued to decline steadily to close at $84.81 per debenture on August 15, 2007, just one week after the August 9, 2007 disclosure, representing a total drop that week of $7.56 per debenture, or 8.18%. The Series B Debentures fell another $0.98 per debenture, or 1.08%, to close at $90.02 per debenture on August 10, 2007. The Series B Debentures continued to decline steadily to close at $81.94 per debenture on August 16, 2007, just one week after the August 9, 2007 disclosure, representing a total drop that week of $9.06 per debenture, or 9.96%.
In connection with the Company’s recent corrective disclosures, on October 17, 2007, The Wall Street Journal reported that the SEC has commenced an inquiry into millions of dollars in stock sales by Defendant Mozilo, the Company’s Chief Executive Officer. In particular, the SEC is investigating the timing of such sales by Mozilo and changes Mozilo made to his arranged stock selling program.
Plaintiff seeks to recover damages on behalf of Class members and is represented by the law firms of Entwistle & Cappucci and Susman Godfrey, which have significant experience in both prosecuting and defending complex business, securities and antitrust actions. The attorneys at Entwistle & Cappucci and Susman Godfrey have personally handled numerous private as well as class action cases resulting in highly significant recoveries to defrauded investors. Entwistle & Cappucci currently serves as Lead Counsel and/or as a member of Plaintiffs’ Executive Committee in many high profile securities class actions currently pending throughout the country. Entwistle & Cappucci’s work in representing financial institutions, venture capital and asset management funds in a variety of complex commercial disputes and transactions, further positions it to bring a unique perspective to the prosecution of complex litigation.
If you purchased the Countrywide Debentures during the Class Period, May 17, 2007 through and including August 9, 2007, you may move the Court to serve as a lead plaintiff no later than December 31, 2007. In order to serve as lead plaintiff, however, you must meet certain legal requirements.
If you wish to discuss this action or have any questions concerning this notice, or your rights or interests with respect to this matter, please contact plaintiff’s counsel, Vincent R. Cappucci, Esq. of Entwistle & Cappucci LLP, 280 Park Avenue, 26th Floor West, New York, New York 10017, Telephone: (212) 894-7200 or Marc M. Seltzer, Esq. of Susman Godfrey LLP, 1901 Avenue of the Stars, Suite 950, Los Angeles, California 90067, Telephone: (310) 789-3100. To learn more about this case or the law firm that filed it, you may visit www.entwistle-law.com, or www.susmangodfrey.com.