From the WSJ:

The Securities and Exchange Commission staff is readying civil fraud charges against Countrywide Financial Corp. co-founder Angelo Mozilo, in what would be the highest-profile government legal action against a chief executive connected to the financial crisis.

The SEC staff sent a so-called Wells notice to Mr. Mozilo several weeks ago alerting him to the potential charges, people familiar with the matter said. Mr. Mozilo’s lawyers could still persuade the SEC’s commissioners that there isn’t sufficient evidence to bring a case.

David Siegel, a lawyer for the 70-year-old Mr. Mozilo, declined to comment on the investigation and said there is no “fair basis” for any allegations against the former Countrywide chief executive.

The charges the SEC is considering include alleged violations of insider-trading laws and alleged failure to disclose material information to shareholders, according to people familiar with the matter.

Mr. Mozilo sold $130 million of Countrywide stock in the first half of 2007 under an executive sales plan, according to securities filings, compared with $60 million in the year-earlier period. He had modified his prearranged plan in late 2006 to accelerate the sales.

Mr. Siegel said the sales were proper. Talk that Mr. Mozilo “was selling Countrywide stock because he was aware of some supposedly ‘secret’ adverse information about the company is scandalous and inconsistent with even a cursory examination of the facts,” the lawyer said.

A Wells notice is a precursor to a civil lawsuit in an SEC investigation. It outlines to an individual or company what charges might be filed and gives a target a chance to respond. If the SEC’s commissioners approve filing a suit against Mr. Mozilo, it could be announced within the next few weeks, said people familiar with the matter. An SEC spokesman declined to comment.

Suits in Four States

Mr. Mozilo has been named in civil suits by attorneys general in four states. In a recent response to such a suit in Florida, Mr. Siegel, the Mozilo attorney, said, “When the true facts are heard, it will be clear that Mr. Mozilo has no personal liability for alleged improper lending practices in the state of Florida or elsewhere.”

Countrywide is also one of many mortgage companies under criminal investigation by federal prosecutors over possible violations during the boom. It isn’t clear whether these probes will produce charges. Criminal investigations require a higher level of proof than civil suits. Criminal investigators are finding a lot of “greed and stupidity” at lenders, but “greed and stupidity are not criminal acts,” said a person familiar with these investigations.

Mr. Mozilo, born in New York’s Bronx borough, the son of a butcher, went to work at 14 as a messenger for a mortgage company. He and a colleague set up shop in 1969 to form Countrywide.

Good to know the ashes of the economy have the firemen watching over the embers.

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