CEO and CFO misled shareholders about financial condition of the bank, alleges suit
A US law firm has filed a class action lawsuit against IndyMac alleging that its chief executive and chief financial officer misled shareholders about the banks exposure to subprime mortgages.
The Complaint alleges that Michael Perry, IndyMac's chief executive officer, and Scott Keys, its former chief financial officer, violated the Securities Exchange Act of 1934 by issuing a series of materially false and misleading statements about IndyMac's financial health.
The statements included assurances that IndyMac, as a prime rather than subprime lender, would be less affected by the turmoil in the housing markets, that it was prudently managing its risks, and that its financial condition was sound, alleged the suit.
The law firm said that at the time the statements were made, the defendants knew or recklessly disregarded that IndyMac was not following prudent loan origination procedures.
As a result of Defendants' allegedly false statements, IndyMac's stock traded at inflated levels, said the suit.
On May 12, 2008, IndyMac announced that it would not be able to return to profitability until the decline in home prices slowed. As a result of the disclosure, IndyMac's stock dropped to close at $2.32 per share on May 13, 2008 a two-day decline of 32%.
On July 11, 2008, IndyMac went into receivership.
Berger & Montague is the law firm bringing the charges.