By Gina Keating

LOS ANGELES, June 5 (Reuters) - Angelo Mozilo, charged with masking the extent of potential losses at Countrywide Financial Corp from investors, could not have predicted the economic tsunami that swamped his company and weakened a huge swath of the banking industry, his defense lawyers are likely to argue.

Mozilo, a Bronx butcher's son turned corporate chieftain, is the biggest name yet to be accused of wrongdoing by U.S. investigators probing the subprime mortgage crisis and housing market bust. [ID:nN04252093]

Vilified as the face of America's housing collapse, Mozilo and two other Countrywide executives were accused in a civil lawsuit by U.S. regulators of misleading investors about the deterioration of lender's underwriting.[ID:nN04240360]

"The defense will try to make this about something much greater than Countrywide and argue that Mr Mozilo should not have been responsible for predicting a global economic collapse," said Robert Mintz, a former U.S. prosecutor and head of McCarter & English's government investigations practice.

Mozilo, who built Countrywide into the top U.S.mortgage lender before its collapse and sale to Bank of America (BAC.N: Quote, Profile, Research), also is accused of netting $140 million from insider trading.

Lawyers say the SEC's approach, which focuses on the failure to disclose vital information about the deteriorating quality of company assets, may provide a template for the commission as it seeks to bring cases against executives at other financial institutions that blew up during the crisis.

The SEC's Countrywide case is likely to hinge on several emails released on Thursday by the government that appear to show that Mozilo was concerned the company was "flying blind" because of the low quality of underwriting, and that a type of risky loan it issued was poison.

"While Countrywide boasted to investors that its market share was increasing, company executives did not disclose that its market share increase came at the expense of prudent underwriting guidelines," the lawsuit said.