reply to the follow discussion thread with a thoughout reply not just yes or no

Hi everyone,

Countrywide was co-founded by Mr. Mozilo and it was based in Southern California. Countrywide was one of the nation’s largest mortgage lender which pushed customers to sign on for complex and costly mortgages to enhance the company’s profits. This company is known as been the epicenter of the mortgage meltdown that in 2008 brought the nation’s economy to collapse. Countrywide built its wealth based on lucrative home loan mortgages and collateralized debt obligations. Angelo Mozilo, the company CEO, was accused of misleading investors about the company’s mortgage lending practices. However, the growing industry of collateral loans and debt obligations financing could not stand for too long.

In the Summer of 2007, a team of corporate investigators pulled from shred bins at Countrywide Financial Corp. a big number of counterfeit mortgages documents. The investigators were able to uncover what they believed was evidence that branch employees had forged the borrower’s information to create fake bank statements, inflated property appraisals and other false documentation. By early 2008, fraud investigators concluded that many in Countrywide’s chain of command were working to cover up massive fraud within the company. For example, emails were found where Mr. Mozilo urged managers to break down on fraud and if they see any email about a fraudster within the ranks, the mangers should order to fire the employee. Nonetheless, in 2008 Bank of America purchased Countrywide, but it took only three years to realize about the hide scandal of sheltering fraudsters inside the company. Countrywide’s management protected big loan producers who used fraud to put up big sales numbers. The potential borrowers were often led to high-cost and sometimes unfavorable loans that resulted in richer commissions for Countrywide managers. However, no executives had gone to jail or convicted of serious crimes. Bank of America was able to pay some millions in fines, but no fraud charges were solved. The Justice Department just said that no solid evidence was found against Mozilo and the civil fraud allegations were removed without major implications.

On the other hand, the SEC announced on December 2007 that three top officers at New Century were accused to commit fraud for misleading investors. New Century filed for Bankruptcy Chapter 11 in April 2007 and was reported as one of the first major casualties of the current U.S. housing crisis. In the case of New Century, the SEC’s complaint names as defendants for the CEO, Brad A. Morrice, CFO, Patti M. Dodge, and the controller, David N. Kenneally. The SEC claimed that New Century generally assured investors that its business was not at risk and was performing better than its peers even when this information was not accurate. Officers at the company like Mr. Dodge and Kenneally fraudulently accounted for expenses related to bad loans that it had to repurchase. These undisclosed accounting changes violated generally accepted accounting principles and resulted in New Century’s materially overstating its financial statements. The former accounting firm entitled to audit New Century, KPMG, was also charged for negligence and lack on independence. It was alleged that New Century did not have a strong internal control system and that lead to a risky financing product. Consequently, executives at New Century were able to overstate profits to hide the weakening position. The three officers were accused for civil crimes and violations of the federal securities laws, disgorgement with prejudgment interest, officer and director bars, and civil penalties.