Judge: Countrywide Shareholders' Suit Can Proceed

LOS ANGELES -- A federal judge has ruled that a shareholder lawsuit against Countrywide Financial Corp. executives and directors should go to trial, rejecting several arguments by the troubled mortgage lender to dismiss the case, The Associated Press reported.

In a ruling issued Tuesday, U.S. District Judge Mariana R. Pfaelzer in Los Angeles sided with several public pension funds, finding that their witnesses' accounts of Countrywide's business practices were compelling, the AP reported.

"Plaintiffs' allegations create a cogent and compelling inference that (Countrywide directors) misled the public with regard to the rigor of Countrywide's loan origination process, the quality of its loans, and the company's financial situation — even as they realized that Countrywide had virtually abandoned its own loan underwriting practices," Pfaelzer wrote in the 61-page ruling, according to the AP.

Pfaelzer noted that several witnesses ready to testify for the funds gave persuasive accounts of Countrywide's business, including allegations that the company rewarded employees for boosting loan volume rather than for generating quality loans, the AP reported.

-- NYSSCPA.org News Staff

Posted on 5/15/08