Customers wait to withdraw funds in Encino after IndyMac Bank failure in… (Karen Tapia-Andersen /…)
Former IndyMac Bancorp Chief Executive Michael W. Perry has won dismissal of much of the fraud lawsuit brought against him by the Securities and Exchange Commission.
U.S. District Judge Manuel Real in L.A. tossed out five of the seven SEC filings by IndyMac that the agency's suit listed as grounds for action.
Real ruled Monday that the filings from the giant Pasadena thrift contained no false or misleading statements to investors about IndyMac’s deteriorating condition as the housing markets melted down.
Real also agreed with Perry's attorney, Jean Veta of Washington, D.C., that Perry can't be compelled to repay allegedly ill-gotten gains from IndyMac because Perry remained a buyer, and not a seller, of IndyMac shares until the thrift collapsed in July 2008.
The SEC suit "should never have been filed," Veta, a partner at Covington & Burling, said, pledging to contest the remaining accusations at a non-jury trial scheduled for June 26 in L.A.
The two remaining SEC filings at issue are IndyMac’s first-quarter earnings report for 2008, and a slide-show presentation that accompanied it. The question is whether IndyMac adequately disclosed threats to its status as a well-capitalized financial institution.
IndyMac was the nation’s largest issuer of stated-income mortgages, also known as liar loans. It failed in July 2008 at a loss of $13 billion to the Federal Deposit Insurance Corp., which eventually sold the thrift to private investors who rechristened it as OneWest Bank.
The SEC filed its securities fraud suit in February 2011 against Perry and two former IndyMac chief financial officers: S. Blair Abernathy, who paid $125,000 to settle the allegations without denying wrongdoing, and A. Scott Keys, who like Perry has denied the SEC allegations.
Keys’ lawyer, Gregory S. Bruch of Wilkie Farr & Gallagher in Washington, said he believes the SEC will now drop its case against his client.
Keys had taken a medical leave from IndyMac before May 12, 2008, when the allegedly misleading quarterly filings were made. He now feels vindicated “and saddened that we had to go through all of this,” Bruch said.
The senior trial counsel representing the SEC, Donald W. Searles, said the agency intends to aggressively pursue the remnants of its case against Perry. The SEC can still try to have Perry barred from serving as an officer and director of a public company, and can seek to impose civil fines on him.
Searles said the agency is reviewing whether to drop its case against Keys and has not yet decided whether to appeal Real’s ruling in the lawsuit.
For the record, 4:10 p.m. May 22: An earlier version of this post stated that a non-jury trial on the remaining accusations is scheduled for June 16. The trial is set for June 26.