- From LexisNexis® Mealey’s™ Daily Legal News.
Former IndyMac FSB CEO Michael Perry on Dec. 14 agreed to a $ 12 million settlement to resolve the Federal Deposit Insurance Corp.’s $ 600 million suit over his alleged role in the bank’s failure, according to a stipulation of dismissal with prejudice filed in a California federal court (Federal Deposit Insurance Corp. v. Michael Perry, No. 11-05561, C.D. Calif.).
The settlement is subject to the approval of U.S. Judge Otis D. Wright II of the Central District of California. The settlement follows a District Court jury’s $ 168.8 million verdict on Dec. 7 against three former IndyMac officers in a related suit brought by the FDIC. The jury found that those defendants had been negligent and breached their fiduciary duties with respect to 23 loans.
According to the stipulation of dismissal, Perry will pay $ 1 million of the settlement from his personal funds, while the remaining $ 11 million will be paid via IndyMac’s directors and officers insurance policies. Under the terms of the settlement, in which Perry did not admit to any liability, the former CEO is also precluded from participating in the banking industry.
Perry was IndyMac’s CEO from 1993 until it closed in 2008, and the FDIC was appointed receiver. The FDIC filed its complaint on July 6, 2011. The FDIC alleged that Perry negligently permitted the production of a pool of more than $ 10 billion in risky residential loans intended for sale to a secondary market. Due to the volatility of the secondary market, IndyMac was forced by the fourth quarter of 2007 to transfer loans into its own investment portfolio. These loans generated losses in excess of $ 600 million. The FDIC alleged that Perry’s actions, whereby he chose to aggressively gamble by investing in the risky loans, were beyond what a reasonable banker would have done under similar circumstances. According to the FDIC, Perry breached his duties to IndyMac and acted negligently in allowing the bank to continue to generate and purchase loans for sale into the secondary market.
In October, Perry agreed to pay an $ 80,000 civil penalty to settle a Securities and Exchange Commission claim against him. The SEC alleged that Perry failed to properly disclose certain information to investors about IndyMac’s capital position.