Press Releases

Press Release : Countrywide Financial ERISA

September 11, 2007

Santa Ana CA. - Countrywide Financial Corp. (NYSE: CFC) employees participating in the company's 401(k) plan today filed a class-action lawsuit against the company, its CEO and all those responsible for overseeing the employees' retirement plan, claiming the organization's illegal actions caused thousands of 401(k) plan participants to lose millions of dollars during the recent stock collapse.

Filed in Federal Court in Santa Ana California, the suit seeks to represent all Countrywide employees who lost millions of dollars in the company-matched 401(k) plan after the mortgage company's stock plummeted when the depths of the company's financial situation became clear.

The suit alleges that while CEO Angelo Mozilo and the insider-appointed benefits committee members had a fiduciary responsibility to warn employees of the company's precarious financial health, they intentionally concealed information from plan participants.

Steve Berman, the attorney representing the plaintiffs, said the actions by Countrywide's CEO and benefits committee members cost thousands of employees millions of dollars. "Most of these employees weren't risk takers, rather claims processors and line staff who go to work every morning, putting a little away every month for retirement, or to finance a child's education," Berman noted. "With Countrywide's demise, they've seen their retirement funds decimated."

Plaintiff Marc Cruz, like many Countrywide employees, deferred a portion of his salary and invested in the company 401(k) savings plan, which Countrywide augmented with a 50 percent match, up to six percent, paid entirely in company stock during calendar years 2005 and 2006.

According to the complaint, Cruz and other employees relied on information supplied by the company, its CEO and other plan fiduciaries in making the decision to contribute to the plan, and according to the complaint, the company, its CEO and the other fiduciaries misled him and other employees.

The suit claims Countrywide CEO Angelo Mozilo repeatedly certified financial statements he knew were misleading in an attempt to cover the high-risk loans his company was selling, all the while telling a different story to investors and ignoring analyst recommendations to compile a reserve.

According to the complaint, Countrywide offers two components in their employee 401(k) plan. The first is a participant contribution plan, where employees can make voluntary pre-tax contributions out of their base pay. The second aspect is a company match plan where Countrywide matches up to a pre-determined percentage.

For the latter portion of the plan, from October 27, 2005 until August 9, 2007, Countrywide provided the match through company stock.

In the past month, Countrywide stock has plummeted. At the end of June, after the company announced charges of $417 million and a loan-loss provision of $292.2 million, Countrywide shares dropped more than 10 percent to $30 per share, losing $1.87 billion in total market capitalization.

On August 16, 2007, after a shattering announcement that the company was using all of an $11.5 billion credit line due, the company's stock dropped 30 percent to $15 per share. Between February of 2007 and August 16, 2007, Countrywide's shares lost nearly three-quarters of their value.

The suit makes several claims of wrongdoing by Countrywide and retirement plan administrators, including: failure to prudently and loyally manage the plan's assets, failure to provide complete and accurate information to participants and beneficiaries, failure to monitor the compensation and benefit plan committees and provide them with accurate information, breach of duty to avoid conflicts of interest, and co-fiduciary liability.

Under ERISA law a plan participant can bring a civil action on behalf of a retirement plan against companies and individuals that breach any of the duties outlined for a fiduciary. According to the complaint Cruz is seeking compensation for money lost, imposition of a constructive trust on any amount by which the defendants were unjustly enriched and for the court to require defendants to appoint one or more independent fiduciaries to participate in the management of the Countrywide stock.

Countrywide employees who are interested in joining this class-action lawsuit can receive more information by calling 206-623-7292, or going to www.hbsslaw.com.

About Hagens Berman Sobol Shapiro
The law firm of Hagens Berman Sobol Shapiro is based in Seattle with offices in Chicago, Cambridge, Los Angeles, Phoenix and San Francisco. Since the firm's founding in 1993, it has developed a nationally recognized practice in class-action and complex litigation. Among recent successes, HBSS has negotiated a pending $300 million settlement as lead counsel in the DRAM memory antitrust litigation; a $340 million recovery on behalf of Enron employees which is awaiting distribution; a $150 million settlement involving charges of illegally inflated charges for the drug Lupron, and served as co-counsel on the Visa/Mastercard litigation which resulted in a $3 billion settlement, the largest anti-trust settlement to date. HBSS also served as counsel in a $850 million settlement in the Washington Public Power Supply litigation and represented Washington and 12 other states in lawsuits against the tobacco industry that resulted in the largest settlement in the history of litigation. For a complete listing of HBSS cases, visit www.hbsslaw.com.

Mark Firmani
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