The suit filed in Los Angeles Superior Court accuses Countrywide CEO Angelo Mozilo and other executives of the mortgage lender of mismanagement for improperly using $2 billion in cash to repurchase stock.
The suit further said the repurchase allowed executives to sell shares of company stock worth $842 million at artificially high prices from April 2004 to October 2007 at the expense of ordinary shareholders.
The suit also said that the insider sales of shares peaked in March, four months before the company posted a 33% drop in second quarter earnings and cut its full-year earnings forecast because of the national crisis in the subprime mortgage lending market.
Countrywide is also at the center of another lawsuit, in this case by employees enrolled in its 401(k) plan. The employees filed suit in September alleging that the plan suffered steep losses after news of the company’s shaky financial status caused a plummet in stock prices (See Countrywide Financial 401(k) Plan Participants Sue Over Plan Losses ).