The Office of the Inspector General of the Department of Treasury issued two audit reports involving Indymac Bank in 2009. One was a “Material Loss Review of Indymac Bank”, issued on February 26, 2009, and the other was “OTS Involvement with Backdated Capital Contributions by Thrifts”, issued on May 21, 2009. Excerpts from these audit reports have been cited in the press, Congressional and government commission reports, and in various civil litigation matters, as factual and authoritative. They are not. These audit reports are biased and inaccurate, and as a result draw incorrect conclusions. And despite affirmative statements to the contrary within these reports, they do not meet the high standards required of audits conducted under Generally Accepted Government Auditing Standards.

Here are just a few examples: Audits under these standards are required to be fair and unbiased and yet these auditors never even attempted to conduct interviews with me or, to my knowledge, any other former managers and/or directors to obtain their viewpoints. In addition, as noted in their report, they received the assistance of FDIC staff in the conduct of their audit. Yet the FDIC, because of their role as conservator, could be the cause of some or all of the insurance fund’s loss. This constitutes a clear conflict and violation of audit standards. In addition, audits under these standards require sampling to be done using established statistical sampling techniques, not a judgmental sample of just 22 nonperforming loans. And last and most importantly, the “Material Loss Review” audit is required by law to identify the causes of the FDIC’s loss in order to help prevent losses in the future. Yet the OIG audit report  does not even attempt to reconcile and describe the sources or causes of the FDIC’s multi-billion dollar loss.

Note: The OIG’s “Material Loss Review” cites information from several annual OTS Safety and Soundness Examination Reports of Indymac. These reports by law, and generally for good reason, are confidential documents. As a result of Indymac Bank’s seizure, there is no longer a legitimate purpose for their continued confidentiality. The banking regulators should release these reports to the public, so that the truth about Indymac Bank can be known: that it was in compliance with all relevant regulations and laws, that it promptly addressed to its regulators’ satisfaction any issues they noted, and that Indymac’s regulators had confidence in the Bank’s management and board as the Bank navigated its way through the financial crisis.

Update: As further evidence of the poor quality of the OIG audit reports, the FDIC in its July, 2011, complaint against me, after a nearly three year investigation of Indymac Bank, did not make any underwriting or appraisal deficiency claims against me; not one of deficiencies noted by the OIG in their report.

October 1, 2010 – SEC Reviewed and Did Not Challenge Accounting for $18 Million Receivable (Attachment, FASB, EITF)

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