Reply #35: Countrywide CEO sold big as stock dropped

[54anickel]

http://www.latimes.com/news/nationworld/nation/la-fi-mozilo29sep29,1,5140882.story?track=crosspromo&coll=la-headlines-nation&ctrack=1&cset=true

As the mortgage industry swooned in late 2006 and 2007, Countrywide Financial Corp. Chief Executive Angelo Mozilo cashed in stock options valued at $138 million -- vastly expanding his wealth even as his shareholders watched their stock shrink in value.

Company executives say Mozilo did nothing wrong and that the transactions were made under trading plans that specified how many shares would be sold each month.

Similar trading plans have been used by hundreds of executives since they were greenlighted by federal regulators in 2000 as a means of fending off accusations of insider trading.

But most executives adopt a plan and stick with it, compensation and securities experts say. Mozilo didn't.

Instead, he shifted course twice in late 2006 and early 2007, according to regulatory filings, amid mounting signs of trouble in the housing and mortgage industries. Mozilo adopted a new trading plan, added a second and then revised it, allowing him to unload hundreds of thousands of additional shares before Countrywide stock went into a tailspin.

"There is clearly no legal prohibition of altering your plan," said David Priebe, a Bay Area attorney who has helped set up more than 50 of such plans for executives. "But the more that you modify or add to your plan over a short period of time, the more risk that someone will call it into question. I would not say that you cannot do it. I would say there is a risk if you do do it."

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