The Smartest Dealmaker on Wall Street

The smartest dealmaker on Wall Street is 73-year old Countrywide Financial’s Angelo Mozilo. He is also one of the best market timers on Wall Street. Before the subprime mortgage crisis hit, Mozilo sold a substantial portion of his Countrywide stock holdings while he told everybody there is nothing wrong with Countrywide to merit those sales. Here is a summary of Mozilo’s insider sales:

1. During the last two months of 2006 Mozilo sold nearly 900K shares of Countrywide for more than $35 Million.

2. During the first quarter of 2007 Mozilo sold 1.6 Million shares of Countrywide for nearly $65 Million.

3. Between April 2007 and early July 2007 Mozilo sold another 1.7 Million shares for $66 Million.

4. Between July 2007 and October 2007 Mozilo sold another 1.3 Million shares for $34 Million as Countrywide’s stock price started to collapse.

Overall Mozilo gained more than $200 Million from these insider sales. He didn’t stop there though. Even though he owned only 2 Million shares, or 0.35% of the outstanding shares, he sold Countrywide to Ken Lewis’ Bank of America for $4 Billion. At the time he made the following prophetic statement:

“We believe this is the right decision for our shareholders, customers, and employees.”

He was right. It was the right decision for Countrywide’s shareholders but it wasn’t the right decision for Ken Lewis and Bank of America shareholders. The worst dealmaker on Wall Street, Ken Lewis, suggested that he was aware of Countrywide’s troubles and said the following:

“Countrywide presents a rare opportunity for Bank of America to add what we believe is the best domestic mortgage platform at an attractive price and to affirm our position as the nation’s premier lender to consumers”

Indeed, it was a rare opportunity to lose nearly $30 Billion to clean up all the mess Mozilo dumped on Bank of America shareholders.

Mozilo received only $14 Million for his remaining 2 Million shares which is infinitely better than zero and going to jail. He executed his brilliant plan without a glitch. Well, maybe there was a small glitch. In 2009, the SEC charged him with insider trading and securities fraud. Unfortunately back then, Preet Bharara wasn’t in charge. The SEC wasn’t smart enough to record Mozilo’s conversations. So as usual the SEC settled another insider trading case for peanuts. Mozilo paid $67.5 Million without admitting or denying guilt. So, technically he wasn’t even guilty of all the things he did.

Now we know that Countrywide was on the verge of an Enron-like crisis, facing nearly $30 Billion in future liabilities for their actions. Mozilo not only sold most of his holdings at sky-high prices but also avoided going to jail. He is definitely the best dealmaker on Wall Street.

There is one question left that we haven’t answered. How could he sell millions of shares without any inquiries from the SEC for more than a year? Simple. SEC’s Rule 10b5-1 allows insiders to buy or sell whenever they want as long as they do it under a 10b5-1 plan. You can read the details about 10b5-1 plans and how you can imitate insiders who use them and beat the market by 9 percentage points per year here.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!