The Associated Press reports that on Tuesday U.S. District Judge Mariana R. Pfaelzer rejected several arguments by the troubled mortgage lender to dismiss the case. “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, according to the AP.
The lead plaintiffs in the case are the Arkansas Teacher Retirement System, the Fire & Police Pension Association of Colorado, and the Public Employees Retirement System of Mississippi. They claim Countrywide directors and officers failed to provide enough oversight and misled shareholders about the company’s true financial state, the news report said.
Countrywide asked the court to dismiss the case, saying that the pension funds did not have legal standing because they had not shown they consistently held stock in the company, among other things. Countrywide Chairman and Chief Executive Angelo R. Mozilo and 13 other current and former top executives and board members are named defendants in the complaint.
The lender has been the target of shareholder and consumer lawsuits since last summer’s housing crash (See NY Pension Funds to Lead Countrywide Class-Actionand Truckers Pension Fund Sues Countrywide for Inflated Stock Prices ). Countrywide shareholders have seen the value of the company’s stock plunge by more than 80% from its five-year peak of $45.03 in February 2007.
The company in January agreed to sell itself to Charlotte, N.C.-based Bank of America Corp. for about $4 billion in stock, the AP said.