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August 2, 2010

KPMG’s Countrywide settlement edges closer

KPMG US was granted preliminary approval by a US federal judge to pay a $24 million settlement over its audit work at mortgage lender Countrywide Financial Corp.

A lawsuit alleged Countrywide investors had been misled about lending practices. In May, Bank of America, which owns Countrywide, agreed to pay $600 million to resolve the class-action, while KPMG agreed to pay $24 million.

Judge Mariana Pfaelzer granted preliminary approval to the settlement at a hearing in Los Angeles federal court earlier this week.

The final hearing will be held 15 November.

The lawsuit is led by several pension funds on behalf of Countrywide investors between March 2004 and March 2008. Countrywide was the largest US mortgage lender before Bank of America acquired it for $2.5 billion in July 2008. The pension funds alleged Countrywide chief executive Angelo Mozilo and other officials misled them about the lender’s reliance on subprime and ‘option’ adjustable-rate mortgages to fuel rapid growth, while assuring them Countrywide would survive a housing market crisis. The US Securities and Exchange Commission accused Mozilo of insider trading over his realisation of more than $139 million of improper profit through stock options in 2006 and 2007.

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