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

10 Top Reasons For Getting Fired

The 3 Best States to Start an LLC

10 Jobs That Allow You to Travel

7 High-Paying Jobs You Can Do From Home

12 Best Cities to Shop in USA

10 Best States To Practice Medicine

The 10 Best States to Have a Business

The 12 Most Expensive Apple (AAPL) Apps in the Market

The 10 Richest Billionaires in the World

10 Biggest Kickstarter Failures

The 10 Best Places to Work At

The Top 10 of Google Inc (GOOGL)’s Most Expensive Acquisitions

13 Best Cities to Visit in South America

10 Most Expensive Works of Art of All Time

The 10 Richest Banks in the World

The 10 Best-Paying Jobs in America (2014)

7 Most Expensive Foods in the World

The World’s Top 10 Earning Authors

Five Wicked and Very Expensive Items (and Other “Stuff”) Sold on eBay

10 Biggest Celebrity Bankruptcies

The Top 10 Highest Paid CEOs in 2014

The 10 Most Expensive Real Estate Cities in America

10 Most Expensive States To Live In America

The 10 Best Airlines in the World

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

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

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!