Countrywide Posts Record Loss After CEO Cashes In

October 26, 2007

Earlier in October we commented on Countrywide Financial CEO Angelo Mozilo’s accelerated sale of shares gained from a generous stock options program. We thought the timing was interesting and noted:

For his part, Mr. Mozilo apparently plans to make millions more by continuing to exercise stock options and selling hundreds of thousands of shares over the next several days even though these options do not expire until 2011. Countrywide’s third-quarter earnings, however, are set to be released later this month.

Now what do you suppose they are likely to reveal?

The answer came today with a thud in the form of a record $1.2 million third-quarter loss. Mr. Mozilo, of course, will argue he knew nothing about the impending loss, which he will assert had nothing to do with the quickened pace of his stock sales. The SEC is looking into that subject. The company’s claim that it will be profitable again in the next quarter pushed the stock up by 15 percent. Listen to this bit of pretzel-twisting logic: One of the reasons Countrywide says it will do well next quarter is because, with the downturn in the economy, people will be less likely to pay off their mortgages earlier.

It’s hard to know what is worse: Countrywide’s Pollyanna-like shareholders, who are overly tolerant of the dubious corporate governance practices that have culminated in absurdly high CEO pay —and a very well paid cast of current and former directors— or its CEO, who thinks he can get away with it.

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