Posted on Wednesday, February 16, 2011
WASHINGTON — Federal regulators filed civil fraud charges Friday against three former executives of the parent of IndyMac Bank, accusing them of misleading investors about the mortgage lender's finances before it collapsed in July 2008.
The Securities and Exchange Commission announced the charges against Michael Perry, former chief executive of Pasadena, Calif.-based IndyMac Bancorp, and former chief financial officers, Scott Keys and Blair Abernathy.
Abernathy agreed to settle, paying a $100,000 fine and $26,592 in restitution plus interest. In addition, Abernathy will be barred from practicing as an accountant for any public company for two years; after that time he can apply to be reinstated. He neither admitted nor denied wrongdoing but did agree to refrain from future violations of the securities laws.
Perry and Keys, through their lawyers, disputed the charges pending against them and said they will contest them in court.
The SEC said the three executives took part in filing false and misleading public reports about the financial stability of IndyMac Bank and the holding company, which filed for bankruptcy protection after the bank failed.
Perry, Keys and Abernathy regularly received reports in 2007 and 2008 about the deteriorating finances but failed to ensure adequate disclosure of the condition to investors even as IndyMac Bancorp sold millions of dollars in new stock, the SEC alleged.
"These corporate executives made false and misleading disclosures about IndyMac at a time when the company's financial condition was rapidly deteriorating," Lorin Reisner, deputy director of the SEC's enforcement division, said in a statement.
The collapse and seizure by the government of IndyMac Bank, with about $30.2 billion in assets, was one of the biggest bank failures in U.S. history. It also was the costliest failure in the current wave for the federal deposit insurance fund, with an estimated loss of $12.7 billion.
IndyMac Bancorp's bankruptcy filing also was one of the largest on record.
Perry's lawyer, Jean Veta, called the SEC's lawsuit "completely meritless."
"It represents the worst kind of Monday-morning quarterbacking of business decisions," Veta said in a statement. "Mr. Perry did nothing wrong, and he looks forward to proving it in court."
"At the same time that the SEC claims Mr. Perry intentionally failed to disclose certain obscure details to investors, Mr. Perry was investing millions of dollars of his own money in IndyMac stock," Veta said. "He believed in IndyMac and did not sell a single share of IndyMac stock since 2005."
Keys' attorney, Gregory Bruch, said "Scott Keys did not defraud anybody; Scott Keys did not make any money during this period at IndyMac." Nor did he sell any stock, Bruch said.
He said Keys "didn't mislead anyone."
"There were no rosy projections in February 2008," he said.
MARCY GORDON, THE HUFFINGTON POST