The FDIC launched a professional liability lawsuit July 2 in Los Angeles against four IndyMac executives. The $300 million suit, which seeks $300 million in damages, accuses the executives of negligently approving loans to homebuilders who weren’t likely to pay them back.
The four defendants operated the Homebuilder Division at IndyMac. President and Chief Executive Scott Van Dellen, Chief Lending Officer Richard Koon, Chief Credit Officer Kenneth Shellem and Chief Lending Officer William Rothman deny the allegations.
“The FDIC has unfairly selected four hard-working executives of a small division of the bank … to blame for the failure of IndyMac,” defense attorney Kirby Behre, who represents Shellem and Koon told the Los Angeles Times.
This suit is the FDIC’s first legal venture related to the wave of more than 200 bank failures that began in 2008 in the financial crisis. IndyMac was overtaken by the FDIC 2 years ago after the bank collapsed. Osterman, the deputy general counsel of the FDIC, predicts that this case will open the doors for negligence suits against other failed banks.
“The FDIC has sent letters warning hundreds of top managers and directors at failed banks–and the insurers who provided them with liability coverage–of possible civil lawsuits,” Osterman, told the Los Angeles Times.