|Countrywide Exec Often Warned About Mortgage Risks|
By Steve Eder
Warnings from McMurray are cited often in a lawsuit filed by the U.S.
Securities and Exchange Commission against Countrywide's co-founder
Angelo Mozilo and two lieutenants. McMurray was chief risk officer of
the lender that became a symbol of some of the worst excesses of the
subprime mortgage crisis.
Mozilo, now the most prominent defendant in investigations into the U.S. housing bust and subsequent financial crisis, was charged on Thursday with securities fraud and insider trading as he made profits of more than $139 million from share sales in 2006 and 2007. Countrywide's former president David Sambol and former chief financial officer Eric Sieracki were also charged with fraud.
McMurray, who is mentioned 31 times in the complaint filed by the SEC,
comes across as an internal watchdog who raised concerns that were
ignored by company officers.
"He is the classic whistleblower," said Stephen Kohn, president of the
Washington, D.C.-based National Whistleblowers Center, who reviewed the
McMurray left Countrywide in August 2007, a month after the
company's surprise disclosure that it had drawn down an $11.5 billion
credit line because it had trouble selling short-term debt. On Aug. 31,
2007, Washington Mutual announced it had hired McMurray as chief credit
officer, and within a week, Countrywide announced his replacement.
At WaMu, he was promoted in April, 2008 to chief enterprise risk officer. He is no longer with the company, whose banking units were acquired by JPMorgan Chase & Co after it failed and was seized by federal authorities last September.
On May 1, McMurray began working as a senior vice president and chief risk officer with the Federal Home Loan Bank of Seattle, a cooperative that provides liquidity to help make affordable housing available to the public.A bank spokeswoman confirmed McMurray's employment and said he had declined to comment for this story. The SEC declined to say whether McMurray had cooperated with prosecutors.
A trail of emails, which were the backbone of the SEC's lawsuit, documented how McMurray expressed concerns about Countrywide's business practices in the months and even years before the U.S. mortgage lending industry hit a wall.
In a 2005 email exchange with Sambol, McMurray warned that "as a consequence of (Countrywide's) strategy to have the widest product line in the industry, we are clearly out on the 'frontier' in many areas," according to the lawsuit. Sambol and Sieracki are accused by the SEC of knowingly writing "riskier and riskier" subprime loans that they had a limited ability to sell on the secondary mortgage market.
PERILOUS GRAB FOR MARKET SHARE
Countrywide was at the center of the collapse of the mortgage and housing industry, a fiasco that has cost banks hundreds of billions of dollars in credit losses and write-downs. Bank of America bought Countrywide last July for $2.5 billion, less than a tenth of what it had been worth in early 2007.
Kohn, of the National Whistleblowers Center, compared McMurray to iconic whistleblowers like Sherron Watkins of Enron and Cynthia Cooper of WorldCom. Watkins, who was a vice president at Enron, alerted then-CEO Kenneth Lay of accounting irregularities before the company's collapse. Cooper was an internal auditor who uncovered fraud at WorldCom. "You can just substitute (McMurray's) name for some of the others," Kohn said. "I think you've stumbled upon the next Sherron Watkins."(Reporting by Steve Eder; Additional reporting by Rachelle Younglai; Editing by Martin Howell and Toni Reinhold)