Accusations have been hurled by the Securities and Exchange Commission (SEC) on former IndyMac executives, CEO Michael Perry and two former chief financial officers Scott Keys and Blair Abernathy, for allegedly filing false disclosures about the company and its subsidiary’s financial health. The securities fraud had thereby led to seriously misleading investors over years.
IndyMac Bancorp, a California-based mortgage lender, has specialised in mortgages that had often required minimal documentation from its borrowers. Banking regulators had taken over the company in July of 2008 as its financial difficulties apparently started to progress. Costs upwards of $12.8 billion were shouldered by the Federal Deposit Insurance Corp, along with IndyMac’s downfall.
Investigations have shown that internal reports about the deteriorating capital and liquidity position at the bank had already been conveyed to the three executives in 2007 and 2008. Such information was kept buried as the company continued to sell millions of dollars in new stock. In addition, the SEC also alleges that Perry refused to disclose to investors a credit-rating downgrade on IndyMac’s bonds in April 2008 that had further damaged the bank’s liquidity.
IndyMac CFO, Blair Abernathy, who took over after Keys has been accused of also making similar misleading comments. He settled the lawsuit without admitting or denying such allegations, and paid $125,000 plus prejudgment interest. Attorneys for Keys and Perry have continued to vigorously contest the allegations. “IndyMac and Mr. Perry were the victims of an .. unprecedented financial tsunami that nobody — not Mr. Perry, not the SEC, nor anybody else — saw coming,” Perry’s attorney said.