Econintersect: When Indy-Mac Bank went belly up in July of 2008, it was the second largest bank failure ever overseen by the FDIC. Friday the SEC filed a suit against three former top executives of the bank for securities fraud. The essence of the charges is that the bank continued to issue favorable reports to stockholders and prospective stockholders that the bank was on a sound footing when they knew, or should have known, that the bank was in trouble.The executives named in the complaints (there were two separate suits) are former CEO Michael Perry and former CFOs, Scott Keys and Blair Abernathy. Abernathy was named in the second suit and has settled, apparently coincidently with the filing.
According to The New York Times:
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 FDIC has previously filed suit against lower executives. Last July four other defendants were named: Scott Van Dellen, Richard Koon, Kenneth Shellem and William Rothman. Econintersect has not been able to locate any information about progress or resolution of that complaint.