For the first time since Madonna still had an American accent and Jerry Jones last owned a Super Bowl contender, the FDIC is suing former officers and directors of a failed bank seeking damages for pre-failure mismanagement. Odds are this won’t be the last; process servers will be busy knocking on more doors.
The FDIC’s complaint (PDF) focuses on former officers and directors in IndyMac’s Homebuilder Division alleging that the President and CEO, and two successive Chief Lending Officers, breached their respective fiduciary duties of care to the bank by approving loans they shouldn’t have approved. The FDIC asks for damages from four individual defendants. Specifically, the FDIC alleges that IndyMac Homebuilder Division executives:
- Repeatedly disregarded credit policies and approved loans to borrowers who were not creditworthy and/or for projects that provided insufficient collateral
- Pushed for growth in loan production volume with little regard for credit quality
- Continued to follow a strategy for growth at the tail-end of the longest appreciating real estate market in over four decades despite awareness that a significant downturn in the market was imminent and despite warnings from IndyMac’s upper management about the likelihood of a market decline
- Unwisely continued operations in homebuilder lending in deteriorating markets even after becoming aware of the market decline