Pay and Compliance Concerns
Mozilo co-founded Countrywide in 1969 with David Loeb (who died in 2003), and has served as chairman and CEO for the last nine years. During his tenure as CEO, Mozilo has encouraged “a culture of non-compliance,” Patterson wrote in his Oct. 19 letter, citing a New York Times article that reported that Countrywide pushed potential borrowers toward high-cost loans, leading to record foreclosures.

Countrywide’s stock value has dropped from around $45 per share in February to below $14. The company announced Oct. 22 that it would refinance approximately $10 billion in loans, and would lower interest rates on an additional $4 billion in loans for those homeowners who do not qualify for refinancing. In September, Countrywide said it would be forced to lay off up to 20 percent of its workforce, or 12,000 workers.

The AFSCME letter, sent Oct. 18, calls on Snyder and the board to add two independent directors and to amend the company’s bylaws to separate the positions of chairman and CEO.

The union pension fund stopped short of asking for Mozilo’s resignation, focusing instead on executive pay practices. AFSCME urged the board to completely restructure the compensation committee, excluding former and current members who have been “tainted” by past pay practices. AFSCME also is calling for a special independent panel to investigate stock option granting practices.

“In the wake of the subprime market turmoil, investor questions have been raised over whether poorly designed compensation policies are at the core of a lax oversight structure that contributed to the situation in which Countrywide and its investors find themselves,” wrote AFSCME Chairman Gerald McEntee.

Mozilo has told The New York Times that his pay is “based on performance.” “Nobody called me when I was making nothing for years and years and said, ‘Can I help?’” Mozilo told the Times.

According to regulatory filings, Mozilo received a total 2006 pay package of over $48 million, plus $15,481 for dues at three country clubs. He is slated to receive up to $10 million in restricted stock--payable over the next three years--for renewing his employment contract instead of retiring as promised in December 2006.

His $48 million package exceeded (by at least $9 million) the CEO pay packages at Bank of America, JP Morgan Chase, and Citigroup, which Countrywide cited as peer companies for assessing its executive pay.

“We fail to see how this adds stockholder value,” McEntee wrote in his letter.

On Oct. 2, a Delaware Chancery Court judge granted the Louisiana Municipal Police Employees Retirement System (LAMPERS) permission to conduct a limited examination of Countrywide’s accounting records to search for evidence of backdating and “spring-loading” of option grants to top executives. According to a study commissioned by LAMPERS and authored by economist Richard Goldberg, 11 individual stock grants had only a 1-in-978 chance of being as lucrative as they actually turned out to be.

The company was ordered to turn over “minutes, notes, presentations, slides,” and other materials relating to stock option grants to officers or executives.

Mozilo is also under informal investigation by the SEC in connection with his sales of Countrywide stock, according to news reports. Under an SEC rule instituted in 2000, executives can sell stock on a planned basis without violating insider trading laws. Before the collapse of the subprime mortgage market, Mozilo increased his stock sales twice, selling up to 580,000 shares per month when Countrywide hit a high of $45.03 per share in February. Mozilo has sold around $150 million in stock this year.

North Carolina State Treasurer Richard Moore, who oversees the state’s pension fund, asked the SEC in early October to look into Mozilo’s stock sales.

“As an investor and a Countrywide shareholder, I was shocked to learn that [Mozilo] apparently manipulated his trading plans to cash in, just as the subprime crisis was heating up and Countrywide's fortunes were cooling off,” Moore wrote in a letter to SEC Chairman Christopher Cox.