Michael Perry, the former CEO of failed IndyMac Bank, has reached a settlement to resolve a subprime related securities lawsuit filed against him for $5.5 million. The March 2007 lawsuit alleged that the defendants’ public statements about the company failed to fully disclose issues with its internal lending controls and underwriting practices, as well as its insufficient loan loss contingencies. The settlement will be funded entirely by directors and officers insurance. It remains subject to court approval and possibly the approval of the bankruptcy court overseeing the IndyMac bankruptcy. If the courts do not allow for insurance proceed to be used to pay the settlement, it will be rendered null and void.
The lawsuit was initially filed against IndyMac Bancorp and its directors and officers, but went through several amended complaints and rounds of dismissal motions, following the closure of IndyMac Bank in March 2008 and the bankruptcy filing of IndyMac Bancorp in August 2008. At the time of the stipulated settlement, Perry was the sole remaining defendant.
Separate FDIC lawsuits against the former directors and officers of IndyMac Bank, including two lawsuits against Perry, remain pending. In addition, another subprime-related securities lawsuit arising out of IndyMac Bancorp’s misrepresentations surrounding Option ARM mortgages remains pending against former executives. (“IndyMac CEO Settles Long-Running Subprime-Related Securities Suit,” The D&O Diary, June 28, 2012).