(Updates with excerpt from filing in fourth paragraph.)
June 1 (Bloomberg) -- Former Countrywide Financial Corp. Chief Executive Officer Angelo Mozilo asked a federal judge to dismiss a lawsuit filed against the Bank of America Corp. unit by Allstate Corp.
Ronald P. Fischetti, a New York attorney representing Mozilo, urged U.S. District Judge Alvin K. Hellerstein in Manhattan to throw out the insurer’s claims that Mozilo was the “architect” of a scheme to abandon underwriting at Countrywide, according to a court document filed today.
Allstate, based in Northbrook, Illinois, claimed in the Dec. 27 lawsuit that Countrywide misrepresented $700 million in residential mortgage-backed securities the insurer purchased. Mozilo held no position at Countrywide subsidiaries that sold mortgage-backed securities, said nothing about the securities and didn’t read the documents that offered them, Fischetti said.
“These conceded facts control the outcome as to Mr. Mozilo,” Fischetti said. “Nothing in aiding and abetting or control person law permits a plaintiff to sue a defendant over sales” of mortgage-backed securities “when he had nothing to do with them.”
Allstate said in the complaint that the securities, purchased from March 2005 to June 2007, suffered “drastic and rapid loss in value” when large numbers of homeowners began to default on their mortgages. Bank of America, based in Charlotte, North Carolina, acquired Countrywide for $4.2 billion in July 2008.
In its complaint, Allstate claimed that Countrywide began ignoring its own underwriting standards in 2003 in an effort to increase its share of the home mortgage market. The company adopted an internal strategy to match any mortgage product feature offered by a competitor, Allstate said.
Mozilo, 72, agreed last year to pay $67.5 million to settle a U.S. Securities and Exchange Commission lawsuit accusing him of misleading investors. The U.S. Justice Department ended a criminal probe of Mozilo that started in 2008 and won’t bring charges, a person familiar with the investigation said in February.
Mozilo was the most prominent executive targeted by U.S. regulators examining the subprime mortgage crisis. He co-founded Countrywide in 1969 and built it into the nation’s biggest mortgage lender. Mounting loan defaults made it impossible for the lender to raise funds to issue new mortgages, prompting its sale to Bank of America.
The case is Allstate Insurance Co. v. Countrywide Financial Corp., 10-cv-9591, U.S. District Court, Southern District of New York (Manhattan).
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