LOS ANGELES (CN) – The SEC claims three IndyMac executives defrauded investors by misrepresenting the bank’s finances as it slid into a financial black hole as the real estate securities market crashed. IndyMac, formerly one of the nation’s biggest mortgage lenders, sold $100 million in new stock while hiding its crumbling finances, according to the federal complaints.
The Office of Thrift Supervision closed Pasadena-based IndyMac in July 2008 and placed it under FDIC receivership, then the bank declared bankruptcy.
The SEC sued IndyMac’s former CEO Michael W. Perry and CFO A. Scott Keys in one complaint, and another former CFO, S. Blair Abernathy, in the other.
“The three executives regularly received internal reports about IndyMac’s deteriorating capital and liquidity positions in 2007 and 2008, but failed to ensure adequate disclosure of that information to investors as IndyMac sold millions of dollars in new stock,” the SEC said Friday in announcing the lawsuits.
The SEC added in its statement: “Perry and Keys defrauded new and existing IndyMac shareholders by making false and misleading statements about IndyMac’s financial condition in its 2007 annual report and in offering materials for the company’s sale of $100 million in new stock to investors. …
“Abernathy made false and misleading statements about the quality of the loans in six IndyMac offerings of residential mortgage-backed securities (RMBS) totaling $2.5 billion. Abernathy received internal reports each month revealing that 12 to 18 percent of IndyMac’s loans contained misrepresentations regarding important loan and borrower characteristics. However, the RMBS offering documents stated that nothing had come to IndyMac’s attention that any loan included in the offering contained a misrepresentation.