“The federal government’s FDIC-R sued me (alone) civilly five years ago this month seeking $600 million in damages, related to IndyMac Bank’s July 11, 2008 seizure by the FDIC, as a result of a U.S. Senator’s remarks that caused a “run on the bank”, during the unprecedented financial crisis. They did not claim I was “extremely careless” or that “any reasonable person in my position should have known it was wrong” (as the FBI Director did of Hillary Clinton and her State Dept. emails on Tuesday and many legal experts have said is no different than “gross negligence”). They also did not claim I committed fraud, misappropriated funds, or had a conflict of interest…

…They sued me for ordinary (not “gross”) negligence; claiming I was a negligent banker, because I alone, did not see the financial crisis coming in early 2007 and reduce IndyMac’s mortgage lending volumes by even more than I was already doing. My attorneys sought to have the case dismissed, because under The Business Judgement Rule directors and officers are protected against reasonable business decisions, that later turn out to be wrong. In fact, some business judgements that later turn out to be wrong in hindsight, might in fact have not been a bad decision at the time they were made. (See discussion of The Business Judgement Rule below.) The federal judge who heard this matter ruled that California’s commercial code (unlike every other State in the U.S.) had a provision that eliminated this protection for officers only. So the FDIC-R sued me as CEO, but not as Chairman of the Board, to exploit this issue. My attorneys cited other rulings and pointed out that the related California law was unclear and asked the judge to certify his ruling, so we could immediately appeal it to the 9th Circuit Court. He agreed the California law was unclear, certified his ruling, and we appealed to the 9th Circuit Court. They declined to hear the matter until after trial and to this day, as far as I am aware, this important California corporate law issue remains unsettled. As a result, as an individual with limited resources, I was forced to settle this matter with the FDIC-R. In the settlement agreement, I DENIED in writing the FDIC-R’s bogus negligence allegation. And the settlement agreement also made clear that the FDIC-R never alleged that my actions caused the bank to fail (because they did not, I did everything in my power to save IndyMac Bank). I paid the FDIC-R $1 million from my families’ personal funds. It wasn’t a fine or penalty, it was a tax-deductible settlement of a civil dispute…really an amount they extorted from me and my family. At the last minute, in order to get myself and my family out from under a $600 million civil suit, they demanded a lifetime ban as a banker. My attorneys said to the FDIC, “settle the $600 million suit and sue Mr. Perry in an enforcement action, as required by law.” They refused. So I was forced to either accept a lifetime ban as a banker or fight both a $600 million civil lawsuit and a separate enforcement lawsuit. They essentially used the “negligence” law glitch in California to extort the banking ban. So I know a little about ordinary negligence, “extremely careless” (e.g. gross negligence), “no reasonable person would have done it”, etc.. I feel strongly that there is one set of rules/laws for business people and ordinary citizens like myself and an entirely different one for politicians and other government officials like Hillary Clinton. When frankly, I and most Americans believe that our government officials and politicians should be held to a higher standard than private citizens. p.s. My blog at www.nottoobigtofail.org has significantly more information re. this matter, if you are interested.”, Mike Perry, former Chairman and CEO, IndyMac Bank, July 6, 2016

“Mr. Comey went further, citing “evidence to support a conclusion that any reasonable person in Secretary Clinton’s position….should have know that an unclassified system was no place for that conversation.” To be “extremely careless” in the handling of information that sensitive is synonymous with being grossly negligent.”, Excerpt from former U.S. Attorney General Michael B. Mukasey, “Clinton Makes the FBI’s Least-Wanted List”, The Wall Street Journal, July 6, 2016

Why The Business Judgment Rule is designed to protect directors and officers of corporations from ordinary negligence suits and hindsight judgment:
“In paradigm negligence cases involving relatively simple decisions, like automobile accidents, there is often little difference between decisions that turn our badly and bad decisions. In such cases, typically only one reasonable decision could have been made under a given set of circumstances, and decisions that turn out badly therefore almost invariably turn out to have been bad decisions. In contrast, in the case of business decisions it may often be difficult for factfinders to distinguish between bad decisions and proper decisions that turn out badly. Business judgments are necessary made on the basis of incomplete information and in the face of obvious risks, so that typically a range of decisions is reasonable. A decision-maker faced with uncertainty must make a judgment concerning the relevant probability distribution and must act on that judgment. If the decision-maker makes a reasonable assessment of the probability distribution, and the outcome falls on the unlucky tail, the decision-maker has not made a bad decision, because some of the outcomes will inevitably fall on the unlucky tail of any normal probability distribution.”

 

“WHETHER THE BUSINESS-JUDGMENT RULE SHOULD BE CODIFIED”, by Melvin A. Eisenberg, May 1995 (http://www.clrc.ca.gov/pub/BKST/BKST-EisenbergBJR.pdf)

Excerpt from an online description of The Business Judgement Rule:
“Fraud and misappropriation cases often involve the business judgment rule. Situations where an officer or director failed to disclose a conflict of interest and instead benefited personally from the situation may also require a plaintiff to get past the business judgment rule. One exception to the business judgment rule requirement exists, however. If no reasonable person would have done what the defendants did, most courts will allow the case to go forward even if the plaintiff cannot yet show that the defendants breached any of their fiduciary duties. Since these cases usually involve some extreme risk-taking or misbehavior, however, they do not come up very often. In most cases, the business judgment rule protects the officers and directors from lawsuits. Corporate officers and directors do not have to make the right decisions to use the business judgment rule, but they do have to uphold their duties of care, good faith, and loyalty to the corporation.”

Posted on July 6, 2016, in Postings. Bookmark the permalink. Leave a comment.

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