In the first case filed against bank executives who sold toxic loans in the recent financial collapse, a Los Angeles jury took just five hours to return the entire $168M sought by the government. D&O Diary has written extensively on the case, including the verdict.
He added, “The defendants tried to blame bank regulators and the economy, but the jury got it right."
FDIC general counsel Richard Osterman said in a statement that the agency was pleased with the verdict. "While most of our cases have settled short of trial, we remain committed to pursuing actions where necessary to maximize recoveries and hold those responsible for losses to failed financial institutions accountable," he said.
The government accused four IndyMac execs of negligently approving 23 loans to developers and homebuilders that were never repaid. The verdict was delivered against three former executives of IndyMac's Homebuilder Division, including Scott Van Dellen (president and CEO); Richard Koon (chief credit officer); and Kenneth Shellem (chief lending officer). Another exec, William Rothman, was sued and settled for $4.75M in October.
The government further claimed the execs profited from the loans, earning bonuses based on their loan generation.
Lawyers for the bankers said financial executives can't get fair trials in the current climate.
“Today’s verdict is the result of a deliberate effort by the government to scapegoat a few men for the impact that the unforeseen and unprecedented housing collapse in 2007 had at IndyMac and at many, many other financial institutions. Mr. Shellem and Mr. Koon used the utmost care in making loan decisions, and there is no doubt that all of the loans at issue would have been repaid except for the housing crash," said Kirby Behre of Paul Hastings. "By unfairly using hindsight to call into question these lending decisions, the government sought to pin the blame on these men for results not of their making. Unfortunately, in the current climate, it is difficult for anyone involved in the banking industry to be treated fairly."
Federal Judge Dale Fischer presided over the 16-day trial. IndyMac was seized in July 2008 and cost taxpayers an estimated $128B. The case is FDIC v. Van Dellen CV-10-4915-DSF.