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Wall Street Journal, March 8, 2008 article


The Wall Street Journal  

March 8, 2008


CEO Apologizes, but Not for Lender

March 8, 2008; Page A3

WASHINGTON -- With home foreclosures sweeping the country and his own company beset by huge losses, Angelo Mozilo, chief executive of mortgage giant Countrywide Financial Corp., finally apologized -- for the tone of an email complaining about reimbursement for his wife's travel expenses.

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Angelo Mozilo, founder and former CEO of Countrywide, told a House panel that almost all of his net worth was in the mortgage company.

At a hearing of the House Committee on Oversight and Government Reform Friday, Mr. Mozilo didn't apologize for his company's performance or the problems that threaten to put hundreds of thousands of families out of their homes. He blamed those events on unexpected turmoil in the credit markets and falling home prices.

Instead, Mr. Mozilo said he now regrets the phrasing of a November 2006 email to a pay consultant -- uncovered by the committee's staff -- in which he suggested he might leave the company unless the board resolved certain issues, including his demand for reimbursement of taxes owed when his wife rode on the corporate jet.

It was "a trivial issue in retrospect," Mr. Mozilo acknowledged to the committee, headed by Rep. Henry Waxman, a California Democrat. "I apologize for that [email]. I regret the words I used. I tend to be an emotional person."

Friday's House Oversight and Government Reform hearing on Capitol Hill.

Explaining the email, Mr. Mozilo said he had intended to retire at the end of 2006, but the board urged him to stay, and a proposed cut in his compensation wasn't what he was expecting. In the end, the board agreed to cover the taxes for Mr. Mozilo. He said a "substantial" amount of money was at stake.

A report by committee Democrats said that Mr. Mozilo received nearly $250 million of compensation for 1998 through 2007 and collected an additional $406 million from sales of Countrywide stock.

Mr. Mozilo repeatedly defended Countrywide, a company that he co-founded nearly 40 years ago. It is due to be acquired later this year by Bank of America Corp. "I've spent my life trying to lower the barriers of entry for Americans to own homes," he said. He told Rep. Elijah Cummings, a Maryland Democrat, that he would send staff to the congressman's district to help Countrywide customers who were struggling with their mortgages, and he promised to give Rep. Eleanor Holmes Norton (D., D.C.) his personal phone number to help her constituents.

"I understand more than anyone else the importance of homeownership," Mr. Mozilo said.

Rep. Cummings wasn't impressed with Mr. Mozilo's apology over the email. "I've got some constituents who are pretty emotional, too, because they're losing their homes," said the congressman.

Mr. Mozilo's email warned that if he left the company, it would owe him significant payouts upon retirement, and he would be able to liquidate his 12 million shares. And when he was gone, he said, the company would no longer benefit from his "travel all over the world on behalf of the shareholders."

Former Citigroup Inc. Chief Executive Charles Prince and former Merrill Lynch Chief Executive Stan O'Neal also testified at the hearing, but lawmakers aimed most of their attention at Mr. Mozilo. The hearing was supposed to consider executive-compensation policies, but lawmakers also questioned each companies' role in the mortgage meltdown.

Congress rarely holds hearings on Fridays, and roughly a dozen lawmakers showed up. The Republicans in attendance defended the witnesses, arguing that they were compensated based on their market value and can't be blamed for the country's housing-market problems now.

"Punishing individual corporate executives with public floggings like this may be a politically satisfying ritual -- like an island tribe sacrificing a virgin to a grumbling volcano," said Rep. Tom Davis (R., Va.). "But in the end, it won't answer the questions that need to be answered."

Write to James R. Hagerty at bob.hagerty@wsj.com9 and Damian Paletta at damian.paletta@dowjones.com10

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