By Ben Jacklet

Oregon has filed two lawsuits against the infamous subprime mortgage lender Countrywide in an attempt to recover $14 million in losses to the state's pension and worker's comp funds.

The state bought and sold Countrywide shares on behalf of the public employees retirement fund and the SAIF worker's comp investment fund during the height of the subprime madness, between 2004 and 2008. But they didn't sell quickly enough.  Attorney General John Kroger and State Treasurer Ted Wheeler argue that Countrywide misled investors about the high risk of its mortgages.

The state was due to receive $500,000 as part of a national class action settlement but Kroger and Wheeler elected to reject that settlement and to file their own lawsuits. Their complaints allege that Countrywide made "numerous statements of material facts in reporting its financial results" while aggressively selling risky products for short term gain. One high risk product that brought short term gains and long term disaster was the "pay-option" adjusted rate mortgage, which led frequently to negative amortization. The longer the borrower held the loan, the more he or she owed on it.

Not surprisingly, Countrywide went down in flames during the subprime meltdown. Bank of America bought up the remains in January 2008.

At least some of the resulting mayhem could have been avoided. The Oregon complaints, filed today in Multnomah County Court, offer numerous examples of Countrywide executives expressing deep concerns about big risks internally. The company's chief risk officer directly warned his colleagues about "high expected default rates and losses." But those concerns never made it out to investors until it was too late.

Ben Jacklet is managing editor of Oregon Business.