Directors Liabilities

Analysis of Four Real Cases of Directors Liabilities

By:

*Case 1- Countrywide Financial (Angelo R. Mozilo)

Facts of the case:

In 2006, ‘Countrywide Financial’ was one of the largest mortgage lenders the nation has ever seen. The company at the time was at the top of its game, and the Chief Executive Officer at the time was ‘Angelo Mozilo’. In January 2008, the huge successful company had to sell itself to the ‘Bank of America’ because of the huge loans that was smothering the company.

Even after the ‘Countrywide Financial’ was taken over, Angelo Mozilo kept publicaly stating that the company is more than able to ride out the financial crisis. However, according to some e-mails and interviews he was giving dim, dark, and gloomy assessments of ‘Countrywide’s’ prospects and practices. What led the Securities and Exchange Commission to file civil securities fraud charges against him was the fact that he knew the problems that faced the company, and in more precise the time he knew these facts.

The grounds of filing of the suit were:

* Securities fraud charges

* Misrepresenting the company’s declining lending standards

Result of the case and lessons learned:

* Angelo Mozilo agreed to pay $67.5 million in a penalty and reparations to investors.

* He was permanently banned from serving as a director or a CEO of any public company.

* The government debated that Angelo Mozilo wrongfully profited on inside information about the company’s loans when they sold Countrywide Financial shares.

The lessons that should be learned from this issue that happened is that the directors should follow the ‘Duty of Obedience’, where the directors or the CEOs’ should act within the suitable and appropriate laws. It was against the law to hide the true financial catastrophe that was about to happen for your self-interest and not the companies’ best interest.

*Case 2- Centro Toombul

Facts of the Case:

Centro Toombul is a shopping center in...