Resolution of All Government Civil Litigation Re. M. Perry: Summarized
“Mr. Perry is now one step closer to moving beyond the financial crisis litigation, with just a couple of private plaintiff lawsuits pending. ‘It remains true that no court has issued a single adverse ruling on the merits against Mr. Perry’, Ms. Veta said, ‘and that is how it should be, because Mike Perry was a smart, honest, and highly capable CEO who did all he could to save IndyMac Bank.’” (Excerpt from “Former IndyMac CEO Resolves FDIC Claims”, Covington & Burling’s press release dated December 14, 2012)
The Covington team representing Mr. Perry was led by Ms. D. Jean Veta and included Benjamin Razi and Dennis Auerbach.
Courts’ Findings (and Approvals of Settlement Agreements) Related to Government Claims:
- The Court found that Mr. Perry acquired 35,000 shares of Bancorp common stock on March 23, 2007, at a cost of more than $1.03 million.
- The Court found that Mr. Perry acquired 328,978.99 shares of Bancorp common stock on February 15, 2008, at a cost of more than $2.6 million.
- The Court found that Mr. Perry sold no IndyMac stock in 2006, 2007, or 2008 and received no bonus for 2007 or 2008.
- The Court found that Mr. Perry beneficially owned more than 3.1 million share of Bancorp common stock (including stock options) on February 29, 2008, comprising about 3.9 percent of issued and outstanding shares. He was the largest non-institutional Bancorp shareholder at the time. As of December 31, 2006, the Bancorp common stock and options Mr. Perry beneficially owned had a value of more than $69 million. His investment in Bancorp constituted the vast majority of his net worth. As a result, of Bancorp’s bankruptcy filing on July 31, 2008, Mr. Perry lost virtually the entire remainder of his investment in the company.
- The Court found that in April 2008, Mr. Perry voluntarily cancelled his fully vested options to purchase one million shares of Bancorp common stock in order to make more stock options available for the company’s shareholders and for the retention of its employees.
- The Court found that Mr. Perry’s IndyMac salary and benefits were not related in any way to alleged false statements and omissions that the SEC contends were contained in IndyMac’s May 12, 2008 SEC filings.
- The Court found that the 10.26 percent capital ratio….was the operative capital ratio as of March 31, 2008, i.e., the capital ratio considered by the OTS in determining whether the Bank was well capitalized…..the Form 10-Q (filed on May 12, 2008) accurately disclosed that the Bank was well capitalized based on the operative capital ratio.
- The Court found, on summary judgment, FOR Mr. Perry and DENIED the SEC’s claim for disgorgement.
- The Court found, on summary judgment, FOR Mr. Perry and DENIED the SEC’s claims based on IndyMac Bancorp, Inc.’s Form 10-K for the year ended December 31, 2007.
- The Court found, on summary judgment, FOR Mr. Perry and DENIED the SEC’s claims based on IndyMac Bancorp, Inc.’s Form 8-K dated February 12, 2008.
- The Court found, on summary judgment, FOR Mr. Perry and DENIED the SEC’s claims based on IndyMac Bancorp, Inc.’s Direct Stock Purchase Plan prospectuses dated October 11, 2007, April 3, 2008, and May 2, 2008.
- The Court found, on summary judgment, FOR Mr. Perry and DENIED the SEC’s claim based on the alleged failure of IndyMac Bancorp, Inc. to timely disclose the deferral of dividends on preferred securities issues by IndyMac Bancorp, Inc. and IndyMac Bank, F.S.B.
- The Court found, on summary judgment, FOR Mr. Perry and DENIED the SEC’s claim relating to the risk weighting IndyMac Bancorp, Inc. (“Bancorp”) used to calculate the capital ratios of IndyMac Bank, F.S.B. as of March 31, 2008, and the disclosure thereof in Bancorp’s May 12, 2008 SEC filings.
- The Court found, on summary judgment, FOR Mr. Perry and DENIED the SEC’s claim under section 17(a)(2) of the Securities Act, 15 U.S.C. 77q(a)(2), as to all remaining issues in the case.
- As part of the September 27, 2012 settlement agreement approved by the Court, the SEC dismissed with prejudice all of the claims in its Complaint filed on February 11, 2011 in which the Court granted summary judgment in favor of Mr. Perry (every item presented to the Court for consideration) on May 31, 2012 and September 10, 2012 (#8 through #14 above). With respect to the SEC’s remaining claim; the alleged disclosure omission of an $18 million capital contribution in the March 31, 2008 10-Q (filed on May 12, 2008), Mr. Perry settled this single negligence-based claim WITHOUT ADMITTING OR DENYING LIABILITY. Mr. Perry paid an $80,000 civil penalty and agreed to an injunction not to violate section 17(a)(3) of the securities laws in the future. Mr. Perry remains able to serve as an officer and/or director of a publicly-traded company.
- The Court ruled that under California law Mr. Perry’s decisions and actions as an officer (CEO) of IndyMac Bank were not protected by the common law Business Judgment Rule (BJR) and that the FDIC-R could sue him for simple negligence. The BJR protects both officers and directors in nearly every other state in the union from hindsight judgments and second-guessing. The Court agreed with Mr. Perry that California law regarding the BJR was not clear, certified its ruling and allowed him to immediately appeal (its ruling) to the 9th Circuit Court. The 9th Circuit Court declined to hear this matter until after trial.
- In Mr. Perry’s Court-approved settlement agreement with the FDIC-R, dated December 12, 2012, the FDIC-R claimed: “In its capacity as successor to the Bank’s claims and causes of action against former officers and directors, the FDIC-R has sued Mr. Perry, alleging negligence in failing to reduce the Bank’s core lending volume (in 2007) further and faster than the Bank was doing.” And in the very next sentence of the settlement agreement, Mr. Perry denied this claim: “Mr. Perry DENIES ANY AND ALL LIABILITY”.
- Importantly, in the same Court-approved settlement agreement, the FDIC-R itself said: “The FDIC-R’s Complaint does not allege that Mr. Perry caused the Bank to fail or that he caused a loss to the FDIC insurance fund.”
- In order to settle the FDIC-R’s meritless claims (seeking $600 million in damages), Mr. Perry reluctantly agreed as part of the court-approved settlement to pay the FDIC-R $1 million from his personal funds (this amount is NOT a civil penalty or fine) and agreed to accept an FDIC enforcement order that roughly means he is prohibited from becoming a banker again.