The Securities and Exchange Commission’s recent trial record hasn’t been exactly stellar. This June, for example, the agency lost a credit-default swap insider trading case against a Deutsche Bank bond salesman and a hedge fund portfolio manager. But next month the SEC has a chance for some redemption, thanks to a ruling Thursday by Los Angeles federal District Court Judge John Walter. The judge denied motions for summary judgment by ex-Countrywide CEO Angelo Mozilo and two other defendants, clearing the way for their trial over SEC securities fraud allegations on Oct. 19.

The SEC’s complaint alleges that Mozilo and senior Countrywide executives David Sambol and Eric Sieracki committed securities fraud by misrepresenting the risks of the loan company’s underwriting practices. Mozilo, who received proceeds of more than $140 million from Countrywide options he exercised from November 2006 through August 2007, is also accused of insider trading.

In his ruling on Thursday
, Walter rejected the defendants’ “truth in the market” defense — namely, that any material information not reflected in challenged securities filings could be found through other sources in the market. “A reasonable investor is not required to pore through hundreds of prospectus supplements, consisting of thousands of pages, issued by Countrywide’s indirect subsidiaries to determine that the underwriting guidelines touted in its Forms 10-K were routinely ignored in making loans,” the judge wrote.

Sieracki alone raised an advice of counsel defense. He argued in his motion for summary judgment that the SEC cannot show he acted with scienter because he relied in good faith on advice and information provided by Countrywide’s in-house lawyers. Walter rejected this argument without much discussion, stating that the SEC’s evidence is sufficient to raise a genuine issue of material fact about the defendants’ scienter. Sambol’s motion is here, and Mozilo’s is here.

Shirli Weiss of DLA Piper, who represents Sieracki, issued this statement: “We understand, of course, that the Court need only find that there are issues of fact in order to decline to resolve the case at the summary judgment stage. His Honor was careful to note that it is not the Court’s function in deciding the motion to weigh the evidence or to determine truth and that it remains to be seen whether the SEC will be able to convince a jury of its case. We agree and look forward to trial.”

Sambol is represented by Walter Brown Jr. of Orrick, Herrington & Sutcliffe, who declined to comment. Mozilo is represented by David Siegel of Irell & Manella and Brendan Sullivan Jr. of Williams & Connolly. Neither responded to a request for comment.

Bloomberg reported in June 2009 that Bank of America (or its insurers) was paying the three defendants’ legal fees under the indemnification agreements they had with Countrywide, which BofA acquired. According to BofA spokeswoman Shirley Norton, the bank is still paying those fees.

This article first appeared on The Am Law Litigation Daily blog on