Forget CEO Brian Moynihan and top trader Tom Montag. The most lavishly compensated guy at Bank of America is, um, Angelo Mozilo.
That is pretty impressive when you consider that Mozilo (deeply tanned, right) hasn’t lifted a finger for BofA (bac) for almost three years, since the bank completed the purchase of his crumbling subprime empire in mid-2008.
But funding the former Countrywide chief’s retirement leisure isn’t cheap. A settlement reached this week means Bank of America has spent some $50 million in Mozilo’s name to settle various legal scrapes.
That compares with a paltry $10 million to $15 million being handed out this year to Moynihan and Montag, and most of that in restricted stock to boot.
What’s more, the gap between Mozilo and BofA’s current management stands to widen as the year goes on. Given Countrywide’s checkered lending history and the many cases pending against Mozilo, BofA will surely find itself writing more checks in Mozilo’s name.
Mozilo got his latest handout from BofA Wednesday, in a $6.5 million settlement of a California state predatory lending suit against Mozilo and David Sambol, his former righthand man at Countrywide, now part of Bank of America Home Loans.<!-- more -->
It was Mozilo and Sambol who, as form dictates, neither admitted nor denied the state’s allegations. But it is BofA that is writing the checks because it agreed in purchasing Countrywide to indemnify Mozilo and his ace lieutenants against legal costs.
That is not the least bit unusual, but it is turning out in this case to be plenty costly.
Take Mozilo’s October 2010 settlement of a fraud suit filed a year earlier by the Securities and Exchange Commission. The SEC headlined its press release with the news that Mozilo would pay the “largest-ever financial penalty against a public company’s senior executive,” $22.5 million.
SEC enforcement chief Robert Khuzami called the settlement “the fitting outcome for a corporate executive who deliberately disregarded his duties to investors.”
But what was more fitting than Khuzami may have liked to admit was how Mozilo and BofA handled another aspect of the settlement, the SEC’s demand that Mozilo disgorge his ill-gotten stock sale profits during the time he allegedly misled investors.
The SEC got Mozilo to agree, without admitting or denying that he misled anyone, to pay $45 million in disgorgement. That’s a lot of money, even for a guy who cashed out $121 million in stock in Countrywide’s last year.
But the disgorgement decision can’t have been a very hard one for Mozilo. After all, BofA was on the hook for that $45 million, and Mozilo for none of it.
That had a familiar ring, of course. BofA agreed in August to settle a subprime class action suit for $600 million, with Mozilo and other execs initially named as defendants getting off scot-free.
You might well guessed by now that BofA may likewise be on the hook for any future settlements that don’t involve paying a penalty to the government. There could be plenty of those: A recent article in Corporate Counsel magazine says at least a dozen civil cases are pending against Mozilo.
In one such case, being heard last month in suburban Los Angeles, a former executive training consultant accuses Mozilo of wrongfully firing him.
Mozilo denies the charges, though his claim to be a reasonable guy is perhaps undermined by his comment that he was OK with firings in general because "I always felt that mediocrity is comparable to cancer."
Nonetheless, onward he presses. "I always regarded myself as a CEO, not a dictator," Mozilo said.
Good thing, too, because you certainly can't tell the difference to look at the river of shareholder money still flowing into the guy’s pockets.