The Securities and Exchange Commission (SEC) filed a civil suit against me and a former Indymac Chief Financial Officer (and another former Chief Financial Officer settled) on February 11, 2011. Essentially, the SEC alleges that, during a period from February to May 2008, we violated certain civil securities laws in an effort to save Indymac.
It is certainly true that I and others at Indymac did everything we could in an unsuccessful effort to save Indymac. It is not true that we violated any laws or regulations in doing so.
I am proud of our timely, accurate, straightforward, and comprehensive disclosures to shareholders and others in all of our SEC filings, but especially those made during the financial crisis of 2007 and 2008.
I think it is important to understand what is not in the SEC’s allegations.
The SEC is not alleging any insider stock selling because there was none. I did not sell a single share of stock since 2005, and, in fact, I made significant stock purchases, in both 2007 and 2008. The SEC also is not alleging any inaccuracy in our financial statements, including areas that required significant judgment such as loan loss and secondary-market warranty reserves, credit marks on loans, valuation of loan servicing rights, and mark-to-market accounting on mortgage securities. In addition, despite an incorrect opinion in a Treasury OIG report and in press accounts, the SEC is not alleging that our accounting for an $18 million regulatory-approved capital contribution to the bank (from the holding company) as of March 31, 2008, was in any way improper; nor are they contesting that Indymac remained a well-capitalized financial institution as of March 31, 2008. Indymac’s financial statements have never been restated for any period in question, and Indymac’s independent auditors’ unqualified opinions remain.
After more than two years of investigation, none of the SEC’s allegations relate to issues that were at the heart of the financial crisis. The SEC does not question Indymac’s disclosures regarding Indymac’s business model as a nonconforming mortgage lender; the quality or quantity of Indymac’s mortgage loans; the losses Indymac Bank suffered in 2007 and 2008 as a result of the unprecedented collapse of both the housing and mortgage markets; or the “bank only” liquidity crisis caused by a deposit “run” that lead to the Bank’s ultimate seizure by the FDIC following the public disclosure of confidential information by an elected public official.
If you read the SEC’s complaint carefully, their allegations about liquidity are about holding company liquidity. But holding company liquidity was not a cause of our failure. Bank liquidity — where the SEC has no allegations — was the cause of the FDIC’s seizure of Indymac Bank.
The SEC is not questioning the more than 15 years of timely and accurate public disclosures on my and the company’s part, including during most of the financial crisis that was devastating the industry.
Instead, what the SEC is alleging is that, in their 20/20 hindsight judgment, and during a 90-day period from February 2008 to May 2008, some additional information should have been disclosed (or disclosed in a different manner) either to Indymac shareholders or to certain sophisticated, institutional investors participating in Indymac’s Direct Stock Purchase Plan (these handful of DSPP investors were arbitrage players and were shorting Indymac’s stock in roughly the same amount as they were purchasing). I would also point out that the SEC has no allegations surrounding our disclosures from May 12, 2008 until our seizure by the FDIC on July 11, 2008; including our timely and transparent disclosures about deteriorating bank liquidity and the “bank run.”
Even with the benefit of hindsight, I do not believe that SEC’s disclosure issues would have been material to shareholders or participants in the DSPP, given the comprehensive disclosures we made to investors regarding Indymac’s financial condition and prospects (including significant losses Indymac was experiencing), the well known condition of the mortgage and housing markets, and the significant short position in Indymac’s stock during this time. The bottom line is that, under these circumstances, any investor — sophisticated or not — who was purchasing or selling Indymac stock during this period clearly understood the nature of this investment, with all the material risks it entailed.
If the types of immaterial disclosure judgment calls at issue here can lead to these kind of charges, then the SEC really has the power to come after any public company official in America at any time they wish to do so and especially if their business fails (which happens all the time in a free market economy). In my opinion, the SEC is substituting their subjective and politicized hindsight judgment, for the judgment of an entire senior management team involved in the Sarbanes Oxley disclosure process, the independent audit committee of the board of directors, the full board of directors, outside legal counsel, and the independent auditors. None of these individuals, many of them experts on securities disclosures, ever raised any of the disclosure issues the SEC is alleging in their complaint with me. I don’t believe this was the intention or spirit of Sarbanes Oxley when it was passed into law by Congress.
Every business leader knows that there are a set of economic conditions or circumstances in which their firm would likely not survive. We could not have foreseen nor imagined a worse set of conditions for Indymac than those that existed in 2007 and 2008 (and neither did the markets or our regulators). And we should not be penalized because we were not on the favored list of institutions that were deemed “too-big-to-fail.” Fed Chairman Bernanke recently said and I concur, “I was not omniscient, I did not see this coming”. The Financial Crisis Commission noted in its recent final report that the Fed Chairman testified that he believed that 12 of the 13 largest banks in the U.S. would have failed in a matter of weeks in the Fall of 2008, without significant government assistance; not to mention previously AAA- rated Fannie Mae and Freddie Mac, among many others around the world. Indymac received no government assistance.
With that said, I regret the losses suffered by investors and others as a result of Indymac’s failure. No one has lost more financially or professionally than I. That being said, the actions I took and the decisions I made during my time as Chairman and Chief Executive Officer were always prudent and appropriate based on the information available to me at the time. Major and historical macroeconomic and systemic events, like this financial crisis, can overwhelm even the strongest and most capable of management teams; and Indymac’s management team, despite the aspersions cast by various plaintiffs and others, was a strong, capable and honest team.
Finally, while I am concerned about fighting the SEC in this matter given their power and resources, they really left me with no reasonable choice. I made significant efforts, in good-faith, to resolve this matter short of litigation, but disappointingly the SEC seemed to be pursuing a larger agenda than the facts of my case.
I am confident that when a judge and jury hears the facts, they will ignore politics and anti-banker sentiment, follow the law and reject the SEC’s allegations against me and Indymac’s former Chief Financial Officer
April 11, 2014 – Statement 167: “Even that wouldn’t cure a second level of constitutional infirmity. Based mostly on precedent established before the SEC had any power to punish, courts have exempted SEC prosecutions from many bedrock due-process protections taken for granted in criminal cases. The presumption of innocence…
April 8, 2014 – Statement 166: “Freddie Mac’s former President, the one who was their Chief Operating Officer right up to the financial crisis and left just about a year before they were placed in conservatorship by the U.S. government (from 2004 through September 2007) is now going to postpone his retirement, so that he can ‘save’ Citi from its regulatory problems with the Fed?”, Mike Perry
April 7, 2014 – Statement 162: “And there was Washington Mutual. TPG led a group of investors in extending a $7 billion lifeline to the struggling bank in the spring of 2008. Just months later, the government seized WaMu, and TPG lost every penny.”, New York Times
April 7, 2014 – Statement 159: “The government’s job as a criminal prosecutor is not to obtain convictions, but ‘to do justice’….It should be required to follow the Brady rule in civil trials…but the SEC does not, even when it accuses a citizen of fraud.”, Mark Cuban and Thomas Melsheimer, WSJ, April 4, 2014
March 13, 2014 – Statement 154: “Thus, (securities) cases certified as class actions—and 77% of decided motions for class certifications are granted, according to a 2014 study by consulting firm NERA—threaten defendants with financial ruin. They subject defendants to relentless pressure to settle, even in cases with weak merits.”, Andrew N. Vollmer, former Deputy General Counsel, the Securities and Exchange Commission
March 10, 2014 – Statement 150: “Sounds a lot like the short sellers who attacked IndyMac and the U.S. housing, mortgage and financial system. I think they might have coordinated. I read that short seller Paulsen donated millions to the Center for Responsible Lending. Then they issued misleading reports about us (and others). Did they get New York, U.S. Senator Schumer to publicly release his letter of concern and spur our bank run (and failure)? Don’t we all deserve to know the truth?”, Mike Perry, Former Chairman and CEO, IndyMac Bank
February 27, 2014 – Statement 147: “(t)he class representatives in this case do not have troubling traits that suggest this is a lawyer-driven litigation by a manufactured plaintiff out to make a quick buck.”, The Honorable Judge George H. Wu, United States District Court Judge, November 14, 2011 (citing from “Cooper”, in granting Lead Plaintiff’s Motion for Class Certification, Sven Mossberg vs. IndyMac Financial, Inc. and Michael Perry)
February 27, 2014 – Statement 145: “From 1997 to 2013, there were 3,200 private securities class-action lawsuits, costing $75 billion (in settlements). There are only about 5,400 U.S. publicly-traded companies on the NYSE Euronext, NASDAQ, and NYSE Amex!!! Based on my experience, I believe that most of these suits are the real fraud; designed to “extort” public companies, by exploiting our dysfunctional civil legal system.”, Mike Perry, Former Chairman and CEO, IndyMac Bank
February 20, 2014 – Statement 144: “The stock price is withering. Investors and analysts are feeling burned….if Mr. Zuckerberg has a revolution up his sleeve, let’s see it. Otherwise, he should settle the lawsuits, expect large staff turnover, and get on with running a business whose scope, prospects, and share price are limited by the limited prospects of advertising on Facebook.” Holman W. Jenkins, WSJ, August 18, 2012
February 19, 2014 – Statement 141: “Securities laws require material information — that is, information that might affect an investor’s view of a company — to be disclosed. That the government would deny a company’s shareholders all its profits certainly seems material, but the existence of this policy cannot be found in the financial filings of Fannie Mae.”, Gretchen Morgensen, New York Times, February 15, 2014
February 13, 2014 – Statement 136: “In December 2008, Citi was effectively insolvent. (It’s) equity-to-assets ratio, measured in market value—the best single comprehensive measure of a bank’s financial strength—fell steadily from about 13% in April 2006 to about 3% by September 2008. And that low value reflected an even lower perception of fundamental asset worth, because the 3% market value included the value of an expected bailout.”, Charles W. Calomiris and Allan H. Meltzer, February 12, 2014
February 12, 2014 – Statement 132: “Annual earnings dropped for the first time since Rackspace went public. The stock price has plunged more than 55% over the past 12 months. Rackspace is far from dead, but its business of offering Web hosting and other cloud-based tech services has undergone a big shift since Amazon’s AWS operation got into the game with that company’s usual playbook of driving down prices.”, Heard on the Street, WSJ, February 11, 2014
February 7, 2014 – Statement 127: “Yelp sells ads through a mix of a self-service model similar to Google’s and a “full-service” model using a sales force. The company doesn’t disclose how much revenue comes from each method, but said it plans to invest more in the business in the coming year to capture more market share.”, Heard On The Street, Wall Street Journal
February 6, 2014 – Statement 126: “Investor Jim Chanos is quietly building an investment thesis around the idea that buybacks are a sign of corporate weakness, not strength. We were both left agog at what his analysis shows.”, Dennis K. Berman, The Wall Street Journal
February 6, 2014 – Statement 125: “Flailing investors…frustrated by low returns and desperate for yield…can delude themselves, pouring money into ill-conceived projects, be they subprime lending or capital flows to emerging markets.”, Nobel Laureate Paul Krugman, January 30, 2014
February 3, 2014 – Statement 117: “What the SEC has done here is highly questionable and vulnerable to challenge…it is hard to fathom what they were thinking (in deciding to redact interviews on grounds of personal privacy).”, Daniel J. Metcalfe, former head of the U.S. Justice Department’s Office of Information and Privacy and director of American University’s Collaboration on Government Secrecy project
December 16, 2013 – Statement 106: “(we) worked together to fully vindicate both our clients after their lives were needlessly disrupted and their reputations were needlessly tarnished by years of litigation (by the SEC). As the Court aptly noted, the evidence showed our clients acted with ‘absolute integrity, prudence, and honesty.’”, David C. Scheper
November 26, 2013 – Statement 92: “These agencies (like the CFPB, FDA, FDIC, NSA, and SEC) have assumed frightening new powers over the everyday lives of American citizens, giving government entities free rein over you and me in ways unprecedented in our country’s history.” Sen. Rand Paul
November 13, 2013 – Statement 85: Does Amazon Have a Special Exemption From the SEC in Complying with Securities Disclosure Laws?
October 22, 2013 – Statement 70: Does JP Morgan Have a Special Exemption from the SEC in Complying with Securities Disclosure Laws Too?
October 21, 2013 – Statement 69: Does Goldman Sachs Have a Special Exemption from the SEC In Complying with the Securities Disclosure Laws?
October 18, 2013 – Statement 66: “I’m glad I’m able to be the person who can afford to stand up to them. I don’t want anything from the SEC; except them to act like American citizens and treat other American citizens the way they deserve to be treated.” Mark Cuban
September 10, 2013 – Statement 47: One Thousand One Hundred and Forty Seven Pages: My Entire Sworn Testimony Before the SEC Staff
March 13, 2013 – Statement 44: The Securities and Exchange Commission v. The State of Illinois
February 4, 2013 – Statement 39: Resolution of All Government Civil Litigation Re. M. Perry: Summarized
September 27, 2012 – Statement 31: SEC Settlement Documents and M. Perry’s Attorney’s Comments Re. Settlement
September 24, 2012 – Statement 30: U.S. Judge Manuel L. Real’s Signed “Findings of Uncontroverted Facts and Conclusions of Law: Related to Order Granting Partial Summary Judgment in Favor of Perry on SEC’s Risk-Weighting and Section 17(a)(2) Claims”
September 10, 2012 – Statement 28: Transcript of 2nd Partial Summary Judgment Motion Hearing Before Judge Real
August 30, 2012 – Statement 27: The Truth is Emerging Despite the SEC’s Attempts to Conceal It.
August 30, 2012 – Statement 26: I think the SEC is engaging in denialism in their statements to the Court.
August 29, 2012 – Statement 25: How about this recent SEC Statement to the Court; is it misleading? I think so.
August 28, 2012 – Statement 24: Are these recent SEC Statements to the Court inaccurate or misleading? I think so.
August 28, 2012 – Statement 23: Status update on SEC vs. Michael W. Perry
August 24, 2012 – Statement 22: Excerpt from Michael W. Perry’s Sworn SEC Testimony
August 23, 2012 – Statement 21: Supplemental Brief in Support of M. Perry’s 2nd Motion for Partial Summary Judgment in SEC Matter
July 2, 2012 – Statement 20: Reply in Support of M. Perry’s Motion for Partial Summary Judgment: SEC’s Risk Weighting and 17(a)(2) Claims
June 13, 2012 – Statement 19: M. Perry’s Motion for Partial Summary Judgment: SEC’s Risk-Weighting and Section 17 (a)(2) Claims
May 31, 2012 – Statement 18: U.S. Judge Manuel L. Real’s Signed “Order Granting Partial Summary Judgment in Favor of Perry and Keys”
May 31, 2012 – Statement 17: U.S. Judge Manuel L. Real’s Signed “Findings of Uncontroverted Facts and Conclusions of Law”
May 25, 2012 – Statement 16: M. Perry’s Motion in Limine to Exclude Testimony of Professor Anthony Saunders
May 25, 2012: Jason Arnold’s January 29, 2012 Declaration (Attachment)
May 25, 2012: Jason Arnold’s May 3, 2012 Declaration (Attachment)
May 25, 2012 – Statement 15: M. Perry’s Motion in Limine to Exclude Analyst Testimony
May 21, 2012 – Statement 14: Transcript of Partial Summary Judgment Motion Hearing Before Judge Real
May 18, 2012 – Statement 13: M. Perry’s Memorandum of Contentions of Fact and Law
May 7, 2012 – Statement 12: Reply Memorandum in Support of M. Perry’s Motion for Partial Summary Judgment
April 23, 2012 – Statement 11: Former FASB Director MacDonald Opines on $18 million Intercompany Payable/Receivable at March 31, 2008
April 23, 2012 – Statement 10: FTI’s Beloreshki Opines on 2008 DSPP Stock Issuance/Impact on Book Value
April 6, 2012 – Statement 9: Former OTS Regional Director Vigna Opines on Disclosure of Various Regulatory Matters
April 6, 2012 – Statement 8: Former SEC Chief Economist Lehn Opines on Materiality of SEC Allegations and Defendants’ Intent
April 6, 2012 – Statement 7: Former SEC Commissioner Fleischman Opines on Indymac’s Disclosure Controls
April 6, 2012 – Statement 6: Declaration of M. Perry In Support Of His Motion For Partial Summary Judgment
April 6, 2012 – Statement 5: M. Perry’s Motion for Partial Summary Judgment
November 30, 2011 – Statement 4: M. Perry’s Responses to SEC’s First Set of Interrogatories
November 21, 2011 – Statement 3: SEC’s Responses to M. Perry’s First Set of Interrogatories
April 15, 2011: M. Perry’s Response to SEC Complaint (Attachment)
February 11, 2011: M. Perry’s Attorneys’ Press Statements Re: SEC Complaint (Attachment)
February 11, 2011: M. Perry Statement Re: SEC Complaint (Attachment)
February 11, 2011: SEC Files Complaint Against M. Perry (SEC Document)
January 15, 2011: SEC Commission Rejects Staff-Negotiated Settlement with M. Perry
January 11, 2011: Press Reports Allegations of Favoritism by SEC Head of Enforcement Re: Citi Settlement (Reuters Article)
January 10, 2011: Settlement Documents Agreed to By SEC Staff and M. Perry (Attachment)
December 19, 2010: Commissioner Walter Says SEC is not a “Merit” Regulator (WSJ Article)
November 3, 2010: Excerpt of Email from Former Indymac Executive re. SEC (Attachment)
October 1, 2010: M. Perry and CFO Submit Supplemental Wells Notice Response to SEC (Attachment)
March 25, 2010: M. Perry Receives Wells Notice from SEC (SEC Document)
December 16 – 18, 2009 - M. Perry Answers SEC Questions Under Oath (Attachment)
September 17, 2009 - SEC Subpoenas M. Perry to Testify Under Oath (SEC Document)
September 9, 2008 - M. Perry Produces Subpoenaed Documents (Attachment)
August 12, 2008 - Excerpt of SEC Subpoena to M. Perry to Produce Documents (SEC Document)
August 1, 2008 – 8-K, IndyMac Bancorp Files for Bankruptcy (SEC Website)
July 11, 2008 – IndyMac Bank Seized by FDIC
July 1, 2008 – 8-K, Exhibit 99.1, IndyMac Discloses Schumer-Caused Bank Run (SEC Website)
May 12, 2008 – Q108 10-Q, Page 48, $39 Million Raised, 7,067,104 Shares Issued Through DSPP (SEC Website)
May 12, 2008 – 8-K, Exhibit 99-2, Indymac Warns May Not Be Well Capitalized in Future, and Continued Dilutive Capital Raising and Losses (SEC Excerpt)
May 12, 2008 – Q108 10-Q, Page 31, Indymac Discloses Subsequent Event; Q208 MBS Downgrades and Impact On Regulatory Capital (SEC Excerpt)
May 2, 2008 – DSPP Prospectus: 10 Million Additional Shares to be Issued, Estimated Share Price $3.88 (SEC Website)
May 1, 2008 – 8-K, Exhibit 99.1, $84 Million Raised Year to Date Through DSPP, $45 Million in Q208, “Raising Capital Every Day” (SEC Website)
May 1, 2008 – Indymac Shareholders Vote 96%+ FOR Re-election of M. Perry and All Directors (Attachment)
April 3, 2008 – DSPP Prospectus: 10 Million Additional Shares to be Issued, Estimated Share Price $5.27 (SEC Website)
March 11, 2008 – 8-K. “Notification of Adverse Market Conditions and 2/12/2008 Forecast Could no Longer Be Relied Upon” (SEC Website)
February 29, 2008 – 2007 10-K, Page 59, $145.6 Million Raised, 7,427,104 Shares Issued Through DSPP in 2007 (SEC Website)
February 29, 2008 – 2007 10-K Risk Factors Updated and Disclosed (SEC Excerpt)
February 15, 2008 – M. Perry Purchases 328,988 Shares for $2.6 Million
February 12, 2008 – Q407 8-K, Page 42, $71.4 Million Raised, 3,959,493 Shares Issued Through DSPP in Q407, $145.6 Million Raised, 7,427,104 Shares Issued Through DSPP in 2007 (SEC Website)
February 12, 2008 – 8K, Exhibit 99.2, M. Perry Warns About the Possibility of Having to Raise Very Dilutive Capital (SEC Excerpt)
February 12, 2008 – 8K, Page 33, Indymac Warns About Factors that Could Adversely Impact its Ability to Stay Well Capitalized (SEC Excerpt)
February 12, 2008 – 8K, Page 3, Indymac Warns Not to Rely on Forward Looking Statements (SEC Excerpt)
February 12, 2008 – Start of SEC Allegation Period: Selected Public Disclosures (SEC Excerpt)
December 6, 2007 – 8-K, Exhibit 99.1, $68.8 Million Raised Through the DSPP in October, 2007 (SEC Website)
November 6, 2007 – Q307 10-Q, Page 44: $74.2 Million Raised, 3,467,493 Shares Issued Through DSPP (SEC Website)
October 11, 2007 – DSPP Prospectus: 10 Million Additional Shares to be Issued, Estimated Share Price $21.18 (SEC Website)
August 30, 2007 – DSPP Prospectus: estimated share price $23.22 (SEC Website)
March 23, 2007 – M. Perry purchases 35,000 shares of IndyMac stock for $1 million
March 1, 2007 – 2006 10-K Disclosed Risk Factors (SEC Excerpt)
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