Ex-Countrywide Execs Throw it in our Faces

BOSTON (MarketWatch) -- Call it another sign that fear is out, greed is back, and we have entered the new post-crisis era. Subprime Stan is back on Wall Street, after less than three years away.

Stanford "Stan" Kurland, the Countrywide Finance executive who pocketed more than $140 million at the expense of outside investors at the height of the subprime mania, has raised about $300 million from fresh investors for his latest venture -- trying to profit from the crisis.

His PennyMac Mortgage Investment Trust (PMT) made its stock-market debut last week.

True, the IPO only raised about half the $750 million originally planned. But it's still plenty. Add it to the $584 million that Kurland has raised from other investors, including BlackRock and Highfield Capital Management, and it gives him a war chest of around $900 million.

The name of the game: Distressed mortgages, particularly the kind of troubled subprime loans that Countrywide used to make.

Buy 'em cheap. Cut a deal with the homeowner. Make a mint.

Kurland knows the business well.

For many years, he was the No. 2 at Countrywide Financial, the nation's biggest mortgage provider. Unlike perma-tanned Chief Executive Angelo Mozilo, Kurland stayed out of the spotlight and under the radar.

Smart move.

Countrywide has since been revealed as ground zero for the subprime scandal. The company, now part of Bank of America, has been widely accused of controversial and reckless lending during the boom.

It has since struck settlements with 40 states to modify controversial loans. The settlements may be valued as high as $8.6 billion. The SEC has charged Mozilo with securities fraud and insider trading in a civil suit. There is a running scandal about friendly mortgages he provided to politicians. (Mozilo, through his attorney, has denied any wrongdoing).

At the height of the boom, the company was valued at $25 billion and was making pre-tax profits of more than $4 billion.

When the crisis brought about its collapse, it was sold to Bank of America /quotes/comstock/13*!bac/quotes/nls/bac (BAC 16.78, +0.08, +0.48%) for scrap.

How did Kurland make out?

Pretty well. A review of all 173 of the company's Form 4 SEC filings shows that from 2003 through 2006 he sold stock to outsiders valued at $203 million, according to my calculations. After deducting stock-option costs, he netted a personal gain of $141 million, again by my calculations. Then he resigned quietly in October 2006 -- just before the roof fell in.

Those outside investors lost nearly all their money when the firm plunged into crisis.

Kurland has since said he was unaware of the scale of the problems at Countrywide while he was there. He declined to be interviewed for this article -- PennyMac is in its regulatory "quiet period" following the IPO. But in March, he and his pals persuaded the New York Times that he had tried to maintain decent lending standards at the mortgage giant. Indeed it was suggested that a dispute over this with Mozilo have been the reason he quit.