Countrywide Financial CEO and co-founder Angelo Mozilo has been charged with securities fraud and insider trading. The Securities and Exchange Commission (SEC) also hit former Chief Operating Officer David Sambol and ex-Chief Financial Officer Eric Sieracki with similar charges.

The SEC said the men deliberately misled investors, leading them to believe that riskier subprime and option adjustable-rate mortgages were safe. It said the executives ignored the warnings of the company’s risk officer about the firm’s precarious underwriting practices.

The SEC claims Mozilo acknowledged privately that the company was unsure about the performance of option mortgages, but publicly spoke about their soundness. Mozilo is also accused of selling $140 million of his Countrywide shares even though he knew the firm was near collapse.

Lawyers for the men say they are innocent and are being charged because the SEC is looking for scapegoats.

Source: The Wall Street Journal, Liz Moyer (06/04/09)