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In the first of the FDIC's 39 suits against bank executives, it has won a jury verdict declaring three former IndyMac executives breached their fiduciary duties by lending recklessly to home builders during the housing boom.
December 10 -
The Securities and Exchange Commission agreed to accept the settlement and forego any appeals after a California judge effectively gutted the government's case.
October 1
Former IndyMac Bank chief executive Michael Perry has settled claims with the Federal Deposit Insurance Corp., although the amount owed to the FDIC is far less than what the agency first sought.
The $12 million deal includes $1 million paid directly by Perry, and as much as $11 million coming from insurers that back professional liability claims. In addition, Perry agreed to a lifetime ban from the industry.
The agency determined that Perry's "practices" in running IndyMac "demonstrate respondent's unfitness to serve as a director, officer, person participating in the conduct of the affairs, or as an institution-affiliated party of the bank" as well as of "any other insured depository institution," the agreement said.
Yet the damages pale in comparison to the FDIC's original $600 million lawsuit against Perry in 2011, alleging negligence in running the $32 billion-asset institution that collapsed in one of the biggest failures of the crisis. IndyMac was the first large FDIC-insured mortgage lender to be seized during the housing crash, and its failure produced the biggest depositor losses of any failed bank during the crisis.
But in a statement late Friday, Perry's attorney called the FDIC's original "simple negligence" claim against Perry "baseless."
The agency alleged "that Mr. Perry should have had a crystal ball, seen the financial crisis coming and stopped making loans sooner than IndyMac did," said D. Jean Veta, a partner at Covington & Burling.
The settlement comes just two weeks after the FDIC, which had estimated losses from IndyMac's failures at $12 billion, prevailed in a jury trial against three former IndyMac executives found guilty of contributing to more than $168 million in loan losses. (After each failure, the FDIC is authorized to investigate potential negligence claims against former officers and directors in order to recoup losses for the Deposit Insurance Fund.)
Perry chose to settle the lawsuit because the insurance funds available for his defense had been exhausted by the multiple claims brought against former IndyMac officers and directors, Veta said. The three insurance carriers on the hook for $11 million to the FDIC include Arch Insurance, ACE American Insurance and AXIS Reinsurance. Under the settlement with the FDIC, the agency can seek a separate action against the insurers if they do not pay their share of the damages. Yet Perry is not liable for that amount.
In October, Perry paid just $80,000 to settle claims brought by the Securities and Exchange Commission in which he neither admitted nor denied wrongdoing.
