The trustee for IndyMac Bank's former parent company is suing its ex-chairman and board of directors, claiming they recklessly mismanaged the company and contributed to its collapse last year.
The lawsuit claims the board and former Chief Executive and Chairman Michael Perry wasted corporate assets, rebuffed investment offers that could have saved the bank and ignored numerous red flags about its financial problems.
Alfred Siegel, the trustee for IndyMac Bancorp Inc., described the board as "merely corporate 'window dressing,'" saying it "utterly failed" to properly oversee Perry's management of the bank.
"Each defendant was responsible for the gross and reckless mismanagement of Bancorp," Siegel said. "In so doing, each defendant abdicated and deliberately disregarded their corporate responsibilities by acting with reckless indifference and in bad faith."
A lawyer for Perry couldn't be reached for comment Monday.
The lawsuit, filed Friday in the U.S. Bankruptcy Court in Los Angeles, comes more than a year after federal banking regulators seized IndyMac in July 2008, one of the largest bank failures in U.S. history.
The government later sold the bank's assets to a group of investment funds that included J.C. Flowers & Co., Paulson & Co. and Dune Capital Management. It is now known as OneWest Bank. The former parent company, meanwhile, is being wound down in bankruptcy.
IndyMac was among the largest mortgage lenders in the country, specializing in high-risk loans known as Alt-A mortgages. Based in Pasadena, Calif., IndyMac was at the center of the housing market's collapse and faced ballooning losses starting in 2007.
Siegel said in his lawsuit that despite IndyMac's mounting problems and a desperate need for additional capital, Perry rejected potential deals from investors and the company's board deferred to Perry and refused to scrutinize his decisions. Investors that approached the bank included MetLife Inc., Warburg Pincus, Goldman Sachs Group Inc. (GS) and Ares Capital, according to the lawsuit.
"As a result of the director defendants' delegation, Perry was left without oversight, free to decide which deals to pursue and which information to share with the board," the lawsuit says. "This, in turn, caused Bancorp to miss critical chances to acquire the capital that could have prevented the bank's failure and Bancorp's insolvency."
Siegel is suing Perry and the board for punitive and actual damages to be determined at trial. The actual damages, according to the complaint, include $355 million transferred from the parent company to the bank in 2007 and 2008.
The trustee is also asking the bankruptcy judge overseeing the case to reject claims from Perry and board members seeking deferred compensation and indemnification rights.
Besides Perry, members of the board named as defendants in the lawsuit are Louis Caldera, Lyle Gramley, Hugh Grant, Patrick Haden, Terrance Hodel, Robert Hunt II, Lydia Kennard and Bruce Willison.
Haden, Willison and Hunt didn't return messages seeking comment. Hodel and Gramley declined to comment. Caldera, Grant and Kennard couldn't be reached.