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11-03-10 Children's Hospital et al v Countrywide, Mozilo, et al (2:11-cv-02056) in the US District Court, Central District of California #001 Complaint against Executives of Countrywide Financial Corporation

11-03-10 Children's Hospital et al v Countrywide, Mozilo, et al (2:11-cv-02056) in the US District Court, Central District of California #001 Complaint against Executives of Countrywide Financial Corporation

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Published by: Human Rights Alert, NGO on Mar 19, 2011
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09/28/2011

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CENTRALDISTRICTOFCALIFORNIA
(AR)
14CHILDREN'SHOSPITAL&011lro1
02056
5JO
X
15MEDICALCENTERFOUNDATION
II
J.J..~
OFOMAHA,HASTINGSCOLLEGECOPLAINTFORVIOLATIONSOF16FOUNDATION,PETERKIEWITTHEFEDERALSECURITIESLAWSFOUNDATION,WEITZVALUEANDSTATELAW17FUND,WEITZPARTNERSVALUEFUND,WEITZHICKORYFUND,18WEITZBALANCEDFUND,RESEARCHFUND,PARTNERSIII19OPPORTUNITYFUND,andHEIDERWEITZPARTNERSHIP,1213
c
c
DIETRICHSIBENTHORPELLPEDWARDP.DIETRICH(176118)2MATTHEWP.SIBEN(223279)DAVIDA.THORPE(216498)3SHAWNM.HAYS(137971)2173SalkAvenue,Suite2504Carlsbad,CA92008Telephone:760/579-73685Facsimile:760/579-7369edward@dstlega1.com6matthew@dstlegal.comdavid@dstlega1.com7shawn@dstlegal.com8
AttorneysforPlaintiffsChildren'sHospital
&
MedicalCenterFoundationofOmaha,9HastingsCollegeFoundation,PeterKiewitFoundation,WeitzValueFund,WeitzPartnersValueFund,10WeitzHickoryFund,WeitzBalancedFund,ResearchFund,PartnersIIIOpportunityFund,
11
andHeiderWeitzPartnership
FILEDClERKU.S.DISTR1CTCOURT
MAR
I
a
2011
CENTRALDISTRI:BCALIFORNIABY~DEPUTY
\..//
UNITEDSTATESDISTRICTCOURT20
L.,\N
Plaintiffs,21vs.22
'Yll
COUNTRYWIDEFINANCIAL23CORPORATION,ANGELOR.MOZILO,DAVIDSAMBOL,ERICP.
if\
24SIERACKI,andKPMGLLP,25Defendants.262728DEMANDFORJURYTRIALCOMPLAINT
 
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Page1
1.
SUMMARYOFTHEACTION12II.JURISDICTIONANDVENUE10THEPARTIES10BACKGROUNDANDOVERVIEWOFDEFENDANTS'WRONGFULCONDUCT133III.4IV.5678910111213141516171819202122232425262728
TABLEOFCONTENTS
A.Countrywide'SBusinessModelandGrowthInitiative13B.CountrywideMisrepresentedtheRisksAssociatedwiththeCom_pany'sNewBusinessModelbyMisleadinglyDescribingtheCreditQualityofItsLoans,DedicationtoSoundUnderwritingPractices,andInternalControls16C.CountrywideRecklesslyIncreasedItsCreditRisk191.CountrywideGenerallyAbandonedSoundUnderwritingPractices192.CountrywideLoosenedItsUnderwritingGuidelinesandIntroduceda"MatchingStrategy"243.CountrywideApprovedNon-QualifyingLoansThroughanExceptionsProcess254.CountrywideOriginatedandHeldPayOptionARMs,WhichDefendantsKnewtoBeExtremelyRiskyLoanProductsImproperlyUnderwritten28D.CountrywideandtheIndividualDefendantsWereAwareofIncreasedCreditRiskfromImprudentLendingandAbandoningSoundUnderwriting301.TheLate2003Meeting302.TheSeptember2004Warnings313.WarningsRegardingtheMatchingStrategy324.HELOCsandWarningsRegarding100%Financing335.WarningsRegardingLoanExceptions376.WarningsRegardingPayOptionARMs397.TheIndividualDefendants'KnowledgeofandFailuretoDiscloseIncreasedCreditRisk44E.CountrywideMateriallyMisstatedItsFinancialResults.471.InadequateAllowancesforLoanLosses512.OvervaluedRetainedInterestsfromSecuritizations53COMPLAINT
 
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3
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3.OvervaluedMortgageServicingRights534.FailuretoProperlyReserveforRepresentationsandWarranties55F.KPMGFailedtoProperlyAuditCountrywide56
4
1.The2004Audit575678
9
10
11
12
13
14151617
18
19
2021
22
2324252627
28
2.The2005Audit.603.The2006Audit.62G.TheIndividualDefendants'MassiveInsiderSales64H.Countrywide'sCollapse:Countrywide'sUndisclosedRiskyLendmgPracticesCausetheCompanytoSufferaLiquidityCrisisandItsStocktoCollapse65V.DEFENDANTS'FALSEANDMISLEADINGSTATEMENTS69A.Plaintiffs'RelianceUponDefendants'Statements69B.Defendants'FalseandMisleadingStatements70C.TheRisksConcealed
by
DefendantsMaterialize,CausingCountrywide'sStockPricetoCollapse,YetDefendantsContinuetoConcealtheFullTruthfromInvestors142VI.LOSSCAUSATION164VII.INAPPLICABILITYOFTHESTATUTORYSAFEHARBOR165VIII.CLAIMSFORRELIEF166IX.PRAYERFORRELIEF175X.JURYTRIALDEMAND176COMPLAINT

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