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Employees File Class Action Against Nation's Largest Mortgage Lender

On October 16, 2007, the law firms Wexler Wallace LLP and Squitieri & Fearon, LLP filed a class action complaint against the nation's largest mortgage lender, Countrywide Financial Corporation ("Countrywide"). The lawsuit, pending in Los Angeles federal court, was filed on behalf of Countrywide employees, alleging that Countrywide - including members of its Board of Directors - engaged in unlawful actions that resulted in severe losses to its employee retirement plan. The suit alleges that Countrywide's business practices have potentially caused its 401(k) plan to lose over $100 million in retirement savings, including by violating numerous fiduciary duties to its employees under the Empoyee Retirement Income Security Act ("ERISA").

The suit alleges that Countrywide funded its retirement plan, in part, by investing employees' deferred salaries in Countrywide stock and matching employee retirement contributions in the form of Countrywide stock. According to Kenneth A. Wexler of Wexler Wallace, "Countrywide opted to tie the health of the retirement plan to company stock values. Unfortunately, it appears that Countrywide's improper business practices, which caused the company's stock values to plummet, put the retirement plan in serious jeopardy."

The suit alleges that Countrywide provided subprime mortgage loans to borrowers who were at high risk and sold risky loan products to these borrowers. The class action further alleges that Countrywide continued these practices without regard to the impending mortgage crisis and represented to investors, its employees and the public that the company was financially healthy.

Countrywide's stock values declined by 40% in the past year. In August 2007, its stock was downgraded from "buy" to "sell" status.

To view a copy of the complaint, click here.