SEC brings fraud charges against three former IndyMac executives
The Securities and Exchange Commission charged three former IndyMac senior executives with securities fraud Friday. The regulator alleges Michael Perry, former chief executive at the failed bank, and former chief financial officers Scott Keys and Blair Abernathy filed "false and misleading disclosures about the financial stability" of the company. They regularly received internal reports about IndyMac’s deteriorating capital and liquidity positions in 2007 and 2008, but didn't properly disclose that information to investors in the company's annual report nor in marketing materials for $100 million in new stock. The Office of Thrift Supervision closed IndyMac in the middle of July 2008. The bank, which was based in Pasadena, Calif., filed for bankruptcy later that month. "Truthful and accurate disclosure to investors is particularly critical during a time of crisis, and the federal securities laws do not become optional when the news is negative," said Lorin Reisner, deputy director of the SEC’s division of enforcement. The SEC contends the executives knew the company was in trouble in early February 2008 when IndyMac announced it would return to profitability and continue to pay preferred dividends that year without having to raise new capital. "In late February 2008, Perry and Keys knew that contrary to the rosy projections released just two weeks earlier, IndyMac had begun raising new capital to protect IndyMac’s capital and liquidity positions," the SEC said. Perry allegedly also knew the bank's capital and liquidity concerns were further weakened by ratings downgrades in April 2008 on bonds held by IndyMac. This left the company no choice but to suspend its dividend, according to the SEC, yet that information wasn't included in the offering statements for the stock sale. The regulator also said Abernathy made false and misleading statements about the quality of the loans in six IndyMac issues of residential mortgage-backed securities worth $2.5 billion. Abernathy settled the charges without admitting or denying any wrongdoing, according to the SEC. In the complaint against Perry and Keys, the SEC seeks "permanent injunctive relief, an officer and director bar, disgorgement of ill-gotten gains with prejudgment interest, and a financial penalty." Write to Jason Philyaw.