View this article online: https://www.insurancejournal.com/news/national/2011/06/01/200718.htm
Angelo Mozilo, the former Countrywide Financial Corp. chief executive, urged a federal judge to throw out Allstate Corp.’s lawsuit seeking to hold him responsible for losses on toxic mortgage debt it bought.
The largest publicly traded U.S. home and auto insurer alleged in a December lawsuit that it had suffered “significant losses” on more than $700 million of mortgage securities it had bought between 2005 to 2007, after Countrywide had misled it into believing the debt was safe.
Allstate called Mozilo the “architect” of a scheme to boost Countrywide’s market share and ignore sound underwriting in a “proverbial race to the bottom.”
It also sued 18 other defendants including Bank of America Corp., which bought Countrywide in July 2008.
Ronald Fischetti, a lawyer representing Mozilo, said his client had no position in the Countrywide units that sold the mortgage debt at issue. He said Mozilo did not talk with Allstate and did not read the relevant offering documents.
Nothing in laws governing liability of executives like Mozilo, “permits a plaintiff to sue a defendant over sales of mortgage-backed securities when he had nothing to do with them,” Fischetti wrote in a filing in Manhattan federal court. “Mr. Mozilo was simply not involved.”
Allstate spokeswoman Maryellen Thielen declined to comment.
The Northbrook, Illinois-based insurer is seeking to undo its mortgage debt purchases plus unspecified damages. It filed similar lawsuits against lenders including Citigroup Inc., Deutsche Bank AG and JPMorgan Chase & Co.
Mozilo agreed in October to a $67.5 million settlement of a U.S. Securities and Exchange Commission civil fraud lawsuit accusing him of misleading investors and generating roughly $140 million of improper gains from insider stock sales.
While Mozilo, 72, did not admit wrongdoing, he was the first top U.S. executive personally punished over alleged wrongdoing tied to the nation’s housing collapse. Bank of America agreed to cover two-thirds of his penalty.
Mozilo co-founded Countrywide in 1969, and turned it into the largest U.S. mortgage lender.
The case is Allstate Insurance Co. et al v. Countrywide Financial Corp. et al, U.S. District Court, Southern District of New York, No. 10-09591.
(Reporting by Jonathan Stempel in New York; Editing by Tim Dobbyn)