Three former “Countrywide Financial Corp.”:http://my.countrywide.com/ vice presidents will plead guilty to charges of insider trading, according to a press release issued by the United States District Court of Los Angeles.
The court says Alan Cao, Quan Zhu, and Jun Shi confessed to betting against Countrywide’s shares a week before a negative earnings report was scheduled to be released in the third quarter of 2004. Cao formerly served the company as vice president of financial planning, Zhu served as executive vice president of portfolio risk management, and Shi served as vice president of planning for the company’s banking sector.

In a press statement, the office of U.S. Attorney Beong-Soo Kim said, “In plea agreements filed today in the United States District Court in Los Angeles, the three defendants acknowledged obtaining information that the parent company of Countrywide Home Loans would not meet analysts expectations for the third quarter of 2004, and then using that information to liquidate common stock they owned, to purchase put options in Countrywide stock, and to short-sell company stock.”

The statement goes on to explain each defendant’s involvement. According to the release, Cao learned during the third quarter of 2004 that Countrywide’s earnings per share would be 94 cents—seven cents lower than Wall Street expectations. He allegedly shared this information with Shi and Zhu, which prompted the three defendants to initiate a series of transactions based on the insider information.