Mozilo severance: $110 million and change

If he engineers a sale of battered Countrywide Financial to Bank of America, Countrywide CEO Angelo Mozilo stands to walk away with a severance package worth more than $110 million, the Los Angeles Times' Kathy Kristof reports tonight.

Such a payout would come on top of huge gains Mozilo has made selling Countrywide stock during the mortgage crisis. As the mortgage industry went into a nose dive in late 2006 and 2007, Mozilo cashed out about $140 million in stock options, becoming one of the highest-paid executives in the country, the L.A. Times reported in November.

The newspaper reports tonight that in his contract agreement, which extended the 69-year-old's employment contract through 2009, Mozilo was guaranteed three times his base salary, plus a cash payment equal to three times the greater of his average bonus or the incentive bonus paid the previous year. Net value: $87.8 million.

In addition, Mozilo has two pensions that his severance agreement gives him the right to receive as a lump sum upon his departure. Those pensions were worth $24 million as of December 2006, the last time the company was required to report their value.

There is more. The Times reports Mozilo would receive continuing health benefits for life for himself and his spouse, three years of life and financial planning benefits, and "tax-gross-up payments" to compensate him for any penalties he'd have to pay for receiving payments the IRS might consider excessive.

Given the slashing of 10,900 jobs at Countrywide this year, and the 81% decline in Countrywide stock over the last year, it is likely Mozilo's severage package will prove more controversial than his previous stock sales.

Your thoughts? Comments? Insights? E-mail story tips to peter.viles@latimes.com
Photo Credit: Bloomberg

Comments

[Uncle Billy]

Biggest news day since Katrina, and Erin Burnett of cnbc's "squawk on the street" is nowhere to be found. I wonder if they dispatched her to the Countrywide HQ in Calabasas like that other poor cnbc reporter that they had reporting from there, in the dark at about 5:00 in the morning.

[John]

Now that jumbo loans have ceased to exist in California for most, the maximum price for houses outside of Brentwood, Pacific Palisades, and San Marino is $417k plus the down payment contribution, or roughly $500k. Prices will continue to fall until that benchmark is met in Simi Valley, Alhambra, and Torrance. Every other comment is stuff and nonsense.

Who cares about Mozillo? He worked the system in the short term, and the long term eventually caught up like is always does. No doubt he'll have to refund 90% of his ill gotten gains through the SEC at some point, and eventually become an obscure footnote in economic textbooks years from now under "Land Speculators".

[Theorist]

Just a thought -- remember when Dubya was out of touch with events as Katrina was unfolding? Now he's pokin' around the middle east, trying a hail mary peace initiative for his "legacy" while the ground is undulating under our feet here in the U.S. Leadership, ya gotta love it. Haven't heard much for our economics czar Paulson lately either. No wonder the Iranians have the chutzpah to buzz around our warships with tiny boats.

[Theorist]

So....... wonder what's going to happen with all the folks that are trying to "work out" their loans with Countrywide. If the lenders are going to be caught up with the transition to BofA, can't imagine they're going to be that focused on the individual or wholesale stopgap measures to forestall foreclosures. Ay Dios Mio. And now Ahnold's budget calls for nearly $5 billion reduction in spending on education? We thought we had a perfect storm brewing last year? Look, ma... look at us now.

[jaded]

My predictions:

Countrywide is going be to an albatross for BofA, as the whole story of their improprieties and bad business decisions have not yet come to light.

This merger will be as successful as Time Warner and AOL.

BofA will lose so much money that the CEO will eventually be forced out. But he'll be sure to take his $300 million severance with him.

[TakeFive]

Maybe this move by BofA makes sense. If CFC went BK, BofA might have to get in line with the rest of the creditors. So BofA throws in a few billion more and gets the whole company.

In spite of the subprime mess and falling equity, I have no doubt that
CFC has many solid loans. Stock price set by panic selling may not be a good indicator of CFC's intrisic value.

[bode]

First of all, the buyout isn't an insult to people with CFC in their 401(k)s: it's a godsend. Given the relentless downward pressure from everyone (NYT, marketplace, etc) CFC really might not have made it. Like I said many times before, that would not have been a good thing for the economy, let alone your 401(k) (schadenfreude aside, of course). Now, everyone with CFC has BAC in their retirement account, and can stop sweating.

Next, to all those people who mentioned Enron (and the Dynergy buyout): notice that the company did not go bankrupt, and instead was purchased for real money. Fed conspiracies aside, I don't know what more evidence you need that the business was not an Enron (Enron was criminal fraud, CFC was reckless, and they aren't the same).

Finally, for the couple people who are still reading this: if you own a lot of a single stock in your 401(k), PLEASE diversify. It isn't ever a good idea to own a lot of a single stock, no matter what. The criminal thing is that our legislators have not mandated everyone with a 401(k) watch a video of Enron exploding, followed by a giant flashing "DIVERSIFY" logo. So, that's a straw-man argument. I'm sure the Bear Stearns director who sold for a near 50% loss in December feels pretty stupid too.

[mike]

this guy made tons of money on other peoples losses. isn't that what capatilism is all about? from reading this commentary i would think these people prefer that the governement regulate how much money people make. but what did they say in the 50's and 60's? better dead than red!

[robert]

Mozilo is a disrace to mankind.He should be in jail.How does the upper middle class expect the great unwashed to accept this?This man and others like him steal, YES I SAID STEAL ,from all of us yet we fill our jails with the underpriveliged for pot.One day the bottom will drop out of society just as it dropped out of the housing market and the poor will be at our doors to cut our throats.We will deserve it for not dealing with sociopaths like Mozilo.James W-you are a liar or an idiot,maybe both.

[Theorist]

One thing I haven't heard mentioned, is that the whole BofA - CW deal might not ever happen. Just because the boards agreed on terms, they're not expecting to close this thing for many many months. A lot can happen in that time. Maybe it is a rescue, but could be that it's a temporary fix until a JP Morgan or other entity (offshore?) comes in and does the real "rescue," at which point BofA could get their money back in spades, and Lewis won't look like a speculator at all.

[RichB]

The truly disgusting part of this whole story is that Countrywide would be bankrupt if it weren't for the billions of taxpayer dollars flowing to them through the Federal Home Loan Banks -- at least $50 billion as of September last year according to the Financial Times. Mozilo's pay-day is coming straight out of taxpayers wallets.

[MyLessThanPrimeBeef]

What gets me is that after the $100 million payout, on top of the few hundreds of millions of dollars he fleeced from CFC earlier, he wants three years of free life and financial planning benefits.

Now, that's just cheap!!!

[anonymous]

It's a shame if Mozillo disappears from the spotlight. He was the king of unintentional comedy. Such greatness hasn't been seen since the former Iraqi Information Minister, and will likely not be topped soon.

One of his better quotes said something to the effect that Countrywide was forced by borrowers to create new products (such as option ARMS).

When was the last time a borrower forced a lender to do anything?

[mattress man]

Angelo Mozilo gives new meaning to his "Bronx Butcher" roots...

..."Hey, Marty. Whatta ya wanna do? I don't know Angie.
Whatta you wanna do?"...

[Uncle Billy]

As long as we're all laughing into our beer (or kool-aid):

I don't think any of this will make any difference to Angelo at all; he has really THICK skin. Literally. I've never seen this phrase so fully fleshed out in real life.

[allfury]

hey ok people calm down if you believe in heaven and hell, then look at that picture [1st thing is how could anyone hire that face at the one to represent their franchise?] but seriously ...

Does that not look like the face of the devil's henchman?

He's got a great retirement spot all set and it's very warm!

Never fear people what goes around, really goes around!

allfury.

[Michael Krupnick]

Lies, lies, lies --- on every day, in every way, the American middle class has been sold out to the highest bidder since before the turn of the century. We are now at the cusp of a fundamental loss of confidence that threatens everything that made America great. And we are participants in this class assignation, burying our heads in the sand while our legs and livelihoods are systematically pulled out from under us. There is no exception: our moral bankruptcy preceded this predictable collision with the brick wall of greed. The institutions we've grown to rely on have rotted because of our own lack of courage and responsibility in defending and maintaining them. We're getting what we deserve.

[xime]

that's a hugeeee mount of moneyyy
http://www.spymac.com/details/?2331359

[LoanOfficer]

Having worked for Countrywide in the past, I can say that they have a very strange business model, in my opinion. Tons of branches that open and close with the expansion/contractiion of the market. People got hired/fired quicker than you could count the number of branches.

This sale is embarrassing for the board and senior executives at CFC. A year ago, the company was worth $25 billion plus on paper.

The thing that gets me, however, is how vicious people are being about Mozilo. The guy isn't a crook; he's a businessman who exploited a niche in the market like any other good business would. He wasn't a monolith and didn't do anything that wasn't done by hundreds of CEOs in the industry. Given that a huge amount of CFC's business was wholesale, brokers also share a large share of the blame. The retail operation was pretty culpable, I must admit, but in the end, it all comes down to personal responsibility. A home purchase is likely the most complicated and important financial transaction a person makes in his/her life. That they wouldn't take the time to learn the pros and cons of the mortgage product they are choosing BEFORE THEY SIGN ON THE LINE THAT IS DOTTED. For them simply to trust the lender/broker is naive at best, wildly irresponsible at worst. Thousands of people will lose their homes because they were stupid and didn't read their documents, or because they gambled without having enough knowledge of the market in which they were speculating.

I wonder how many of the Angelo-bashers are renters.

[Erioke]

He built this company. He's not just a manager... doesn't seem that unreasonable. Instead of blaming him, blame all the moronic home buyers who either thought they'd get rich quick or signed on for a loan that they didn't understand.

Its a lot less popular to blame Joe Public... but he's the real reason for this mess.

Are we going to blame the CEOs of credit card companies when card users spend more than they can pay back?

[business]

There's a problem when a CEO walks away with that kind of money - when thousand and thousands of people loose their jobs and billions of dollars lost in stocks.

[Connecticut Man1]

This turd is getting a $110 million dollars and we are losing our Countrywide mortgaged house. I wonder how many houses could have been saved with that money?

America: The land of opportunity if you are a CEO already...

[Dean Beith]

Why isn't suit being filed against Mozilo? He needs to be jailed, I mean Martha Stewart didn't do anything like Mozilo. Oh well he will die sooner than later and won't be able to take the money with him. Everyone can spit on his grave! Enjoy my retirement money Mozilo.

People complaining here will do little good, actions must be taken against CFC as well as it's CEO.

[Uncle Billy]

Ok... it's hard to focus anger elsewhere.... but...

What about David Sambol, the COO? Maybe he was the real brains behind the operation in recent years. Plus, he's a local boy, having attended Cal State Northridge. No scorn for him?

Or how bout the little irish fellow in charge of global operations?

[Ugly American]

He should go to jail right next to the clerk who stole $20 out of the cash register at 7-11.