AP source: Feds drop criminal probe against Mozilo (AP)

LOS ANGELES – Federal prosecutors have ended a criminal investigation of Countrywide Financial Corp. co-founder Angelo Mozilo, a person close to the investigation said Friday.

The federal official told The Associated Press that the probe launched in 2008 into the actions of the former chief executive of the housing giant during the mortgage meltdown has been closed with no indictments. The person spoke on the condition of anonymity because the investigation was never publicly announced, and the Department of Justice as a policy does not announce the closing of investigations.

In October, Mozilo agreed to a $67.5 million settlement to avoid civil trial on fraud and insider trading charges brought by the Securities and Exchange Commission, but prosecutors pursuing the criminal case against him found that his actions did not amount to crimes.

The SEC's charges alleged that the 72-year-old Mozilo and two other former Countrywide executives who also settled profited from doling out risky mortgages while misleading investors about the dangers.

The three men admitted no wrongdoing under the settlement, and it allowed them to avoid the risk of a verdict that could have been used by the prosecutors who would eventually drop the investigation.

Mozilo attorney David Siegel said he could not speak directly to the federal criminal investigation or the SEC charges, but maintained that Mozilo had done no wrong in the cases the former chief executive still faces.

"We continue to litigate various matters in which Mr. Mozilo has maintained his innocence and denied any wrongdoing, and we continue to believe that the facts bear that out," Siegel said.

That litigation includes several civil lawsuits, some filed by investors in Countrywide's mortgage-backed securities.

The shelving of the investigation was first reported by the Los Angeles Times.

The son of a Bronx butcher, Mozilo co-founded Countrywide 41 years ago and watched it grow into the nation's largest home loan originator, writing one in six of the nation's mortgages totaling more than $490 billion by 2006.

But the Calabasas, Calif.-based company spiraled into disaster as investors suddenly realized many homeowners wouldn't be able to repay mortgages that required no proof of income or down payment, and offered adjustable rates that quickly made monthly payments unaffordable.

Bank of America Corp. bought Countrywide and inherited its scores of toxic mortgages in July 2008.

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India police broaden graft probe; shares take a hit (Reuters)

NEW DELHI (Reuters) – Indian police raided a television station linked to the government on Friday, as a widening investigation into a corruption scandal threatened the coalition and worried investors sent blue-chip stocks lower.

Prime Minister Manmohan Singh is under growing pressure over his role in the illicit sale of mobile phone licenses, although he has said he would not resign, blaming the debacle on his sacked telecommunications minister, who is now under arrest.

Its blue-chip Sensex index turned negative after news of the raid, falling 1.8 in afternoon trade. Investors are concerned the deepening probe will raise the possibility of license revocation, which would damage key telecoms firms.

Mumbai is the world's worst performing major stock market this year, with losses of 11 percent.

"Raids have been carried out today on the offices of Kalaignar TV in connection with the 2G scam," said a Central Bureau of Investigation (CBI) official, who declined to be identified.

The raids followed allegations that companies linked to Swan Telecom, under investigation in the sale of 2G mobile licenses, had paid $47 million to the channel owned by the family that runs the Dravida Munnetra Kazhagam (DMK) party.

The south Indian-based party is a member of Singh's Congress party-led coalition, helping it maintain a slim majority in parliament. The DMK has denied any wrongdoing, as has Swan Telecom, now partly owned by the UAE's Etisalat.

The DMK, from the state of Tamil Nadu, is not expected to leave the coalition but the investigation is testing its links with Congress and could put pressure on it to decide whether to stay in the alliance.

The corruption scandal has shaken India's business elite and shows no signs of abating. Billionaires Anil Ambani and Prashant Ruia have both been questioned by the CBI, something unheard of in India in recent times.

Shares in companied linked to the scandal have suffered. Reliance Communications, India's No. 2 mobile phone operator controlled by Anil Ambani, fell 6.9 percent on Friday.

The Sensex is down 11 percent this year, the worst performers among major Asian markets, with worry about graft keeping investors on edge.

"FIIs (Foreign institutional investors) don't know how deep is the corruption mess yet. So, they are either staying away or exiting when they have an opportunity," said Prakash Diwan, head of institutional business at Networth Stock Broking in Mumbai .

The CBI is investigating whether Swan Telecom, now renamed Etisalat DB, paid a bribe to the DMK in exchange for the former telecommunications minister and senior DMK member, Andimuthu Raja, giving the company a mobile phone license.

The investigation of the sale of licenses in the world's second largest mobile phone market is the biggest crisis to face the prime minister and his ruling coalition since they were returned to power in 2009.

TESTING COALITION

The Congress party-led government is not in great danger of collapsing because of its support from its coalition allies, whose positions within government keep them from jumping ship.

Most analysts expect the DMK to stick with Congress for fear they would do worse in an upcoming state election this year.

"These raids, Raja going to jail, and the promise of a substantial reshuffle, show Singh is determined to do what he wants to do, but if he can't show improvements in the next two months, the long-term issues (of remaining in power) will become more scrutinized," said Manoj Joshi, an editor at the Mail Today.

The government on Thursday scrapped another lucrative satellite telecoms contract because of irregularities, dealing a fresh blow to Singh, whose office was ultimately responsible for the deal.

Foreign investors, keen to get into one of the world's fastest growing major economies, are starting to pay close attention to the scandal as it has exposed India's struggle with regulation and transparency.

India has long grappled with cracking down on corruption, which has not significantly hurt foreign investment due to the market potential of Asia's third-largest economy.

The last parliamentary session was halted by opposition protests demanding an investigation into the telecoms scam, effectively stopping any reform bills such as one to make land acquisition easier for both industry and farmers.

Singh's government appears close to agreeing to a broad, cross-party investigation into the 2G mobile scandal, paving the way for parliament to resume for a February 21 budget session.

(Additional reporting by Manoj Kumar and Alistair Scrutton in New Delhi and Ami Shah in Mumbai; Writing by Paul de Bendern; Editing by Daniel Magnowski)

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