A week after winning a $169 million jury verdict against three executives of IndyMac Bancorp Inc., the Federal Deposit Insurance Corporation reached a settlement on Friday with Michael Perry, the ex-CEO of the failed mortgage lender. In the settlement, Perry denies any liability for the problems that sank the mortage lender, but agrees to pay $1 million to the FDIC, which also intends to recover another $11 million through the director and officer insurance policies that covered Perry. (Read the stipulation and agreement
The FDIC seized IndyMac after the 2008 financial crisis led to a run on the Pasadena, California-based thrift by its depositors. The FDIC and the Securities and Exchange Commission subsequently filed suit against several IndyMac executives, claiming that they bore responsibility for the lender’s failure. The SEC’s case against Perry was largely wiped out earlier this year in rulings by Los Angeles U.S. district court judge Manuel Real, as we reported
.The FDIC continued to pursue its action against Perry, however, alleging that he failed to reduce IndyMac’s core loan volume “further and faster than [it] was doing.”
Despite Perry’s wins in the SEC case, he was in a weakened position in the FDIC action, according to his defense counsel at Covington & Burling. “Perry decided to settle the FDIC’s lawsuit in large part because the insurance funds available to fund his defense had been exhausted by all the various lawsuits brought against former IndyMac officers and directors,” Covington said in a statement released on Friday. The statement further notes that all of the SEC’s claims against Perry were dismissed in court except for a single negligence-based claim, which the ex-CEO agreed to settle for $80,000 without admitting or denying liability.
Covington partner D. Jean Veta, who led Perry’s defense team, said in the statement that the FDIC’s case amounted to an allegation that her client “should have had a crystal ball, seen the financial crisis coming, and stopped making loans sooner than IndyMac did.”
In addition to requiring Perry to pay $1 million to settle its claims, the FDIC is also barring him from ever working in the banking industry again. In its order of prohibition, the FDIC states that it “has reason to believe that [Perry] … engaged or participated in unsafe or unsound banking practices” at IndyMac, and that these practices “demonstrate [his] unfitness” to serve as a director or officer at any FDIC-insured institution. (Read the order of prohibition
“The FDIC extracted this condition at the eleventh hour because they could,” Veta said in the Covington statement. “The FDIC knew Perry was out of insurance funds, and they took advantage of the situation.”
Nossaman partner Stephen Wiman, lead counsel for the FDIC in its suit against Perry, referred our request for comment to agency spokesperson David Barr, who reiterated that the settlement “will bar [Perry] from banking, and recovers $1 million in personal assets and up to $11 million of insurance policy money.”
Perry’s settlement was announced exactly one week after the FDIC won a remarkable victory in a suit against three other former IndyMac executives. A U.S. district court jury in Los Angeles found that the defendants—Scott Van Dellen, Richard Koon, and Kenneth Shellem—had been negligent and breached their fiduciary duties in connection with 23 failed homebuilding loans. The jurors awarded $169 million in damages to the FDIC, which was represented by Nossaman.
But the FDIC will face a challenge in collecting that jury award, as we noted in
In July, Los Angeles U.S. district court judge Gary Klausner issued a
that IndyMac’s D&O insurers do not have to cover the FDIC’s damage claims. Wiley Rein, which represented one of the insurers, analyzed Klausner’s ruling in this
. The D&O Diary considered how Klausner’s decision could limit the FDIC’s ability to collect its $169 million award in
And one of our former colleagues looked at what the FDIC has to do next in
for Thomson Reuters.