This was not a good week for Countrywide president and COO David Sambol.
First, a federal court refused to dismiss a shareholder suit against Sambol and other executives and directors of Countrywide.
The lawsuit that alleges that Sambol and the other defendants violated their fiduciary duties by lack of good faith and lack of oversight of Countrywide’s lending practices, improper financial reporting and internal controls, and the unlawful sale of over $848 million of Countrywide stock between 2004 and 2008 at inflated prices based on material inside information.
In refusing to dismiss the case, the judge said that the evidence presented by the plaintiffs “create[s] a cogent and compelling inference that the Individual Defendants 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.”
The plaintiffs are seeking millions of dollars in damages.
Second, Sambol was given the heave-ho by Bank of America, the new boss at Countrywide.
When Bank of America announced plans to take over Countrywide in January, CEO Ken Lewis said Sambol would continue to lead the entire mortgage business for B of A once the merger was complete. Sambol was even given a retention bonus of $1.9 million and 335,126 restricted stock units.
Then in March, Bank of America agreed to set up a $20 million retention account for Sambol, plus $8 million in restricted stock.
But that was then.
This is now:
Bank of America announced this week that Sambol is being replaced by Barbara Desoer, B of A’s chief technology and operations officer.
One of the allegations in the shareholder suit is that Bank of America “bought” Sambol’s support for its takeover of Countrywide with extravagant remuneration offers and the promise that he would run the combined company’s consumer mortgage business.
Now it appears that Sambol, along with Countrywide CEO Angelo Mozilo, are too tied to the subprime mortgage debacle and the foreclosure crisis — and perhaps unlawful stock sales and other breaches of fiduciary duties — for Bank of America to keep around.