Michael Perry, former head of IndyMac, which was seized by regulators in… (Handout )
The Federal Deposit Insurance Corp. sued former IndyMac Bancorp Inc. Chief Executive Michael Perry, accusing him of causing more than $600 million in losses from risky mortgage loans that couldn't be sold.
Perry acted negligently when he allowed IndyMac to generate and purchase $10 billion in loans for sale in the secondary market in 2007 when he knew that that market had become unstable and illiquid, the FDIC said Wednesday in a complaint filed in federal court in Los Angeles.
When IndyMac wasn't able to sell the loans, the bank was forced to transfer them to its investment portfolio where they created more than $600 million in losses, according to the complaint. In 2008, Perry acknowledged that he was responsible for the debacle, according to the complaint.
"Instead of enforcing credit standards, Perry chose to roll the dice in an aggressive gamble to increase market share while sacrificing credit standards," the FDIC said in the complaint.
IndyMac, once the second-largest U.S. independent mortgage lender, was seized by regulators in July 2008 after a run by depositors left the Pasadena-based company strapped for cash. The Securities and Exchange Commission, in a lawsuit filed in February, accused Perry and two other former IndyMac executives of failing to warn investors of the bank's deteriorating financial condition.
D. Jean Veta, a lawyer for Perry, said in an e-mail that the lawsuit was "baseless."
"The FDIC's belated claim that Mr. Perry was somehow 'negligent' is dead wrong," Veta said. "Mr. Perry was a prudent, effective CEO who led IndyMac in good faith. His sound business judgment is confirmed by the fact that the federal banking regulators consistently praised Mr. Perry's leadership of IndyMac during the very same time period at issue in the new meritless lawsuit."