A former chief executive of failed mortgage lender IndyMac Bancorp and two former chief financial officers were accused of securities fraud for concealing the bank's financial condition, US securities regulators said on Friday. The Securities and Exchange Commission alleged in one lawsuit that former IndyMac CEO Michael Perry and former CFO Scott Keys filed false disclosures about the financial health of the company and its IndyMac Bank subsidiary.
California-based IndyMac, which specialised in a type of mortgage that often required minimal documentation from borrowers, was seized by banking regulators in July of 2008 as the financial crisis gathered steam.
Its failure cost the Federal Deposit Insurance Corp, which stands behind bank deposits, about $12.8 billion. Another former IndyMac CFO, Blair Abernathy, settled a related SEC lawsuit without admitting or denying the allegations, paying $125,000 plus prejudgement interest.
The SEC alleges that the three executives received internal reports about the deteriorating capital and liquidity positions at the bank in 2007 and 2008. But the SEC said they kept that information under wraps even as the company filed to sell millions of dollars in new stock. Attorneys for Keys and Perry vowed to vigorously contest the allegations. Both suits were filed in US District Court in California.
"This is a very large bank failure and there is tremendous pressure on the SEC to try to find facts that conform to a narrative that suggests there was misconduct," said Gregory Bruch, an attorney for Keys. "What they have pleaded here... speaks volumes of the lack of what they found."
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