Monday, December 10, 2012
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U.S. Jury Returns Verdict Against Ex-IndyMac Executives
By JACKIE FUCHS, Staff Writer
A federal jury awarded $168 million Friday to the Federal Deposit Insurance Corporation in its case against three former executives of Pasadena’s defunct IndyMac Bank, lawyers for the FDIC said Friday.
The jury deliberated less than five hours before finding Scott Van Dellen, Richard Koon, and Kenneth Shellem liable for negligently approving loans to developers and home builders. The FDIC previously settled with a fourth defendant, William Rothman.
The FDIC filed suit in July 2010 against the men, who worked at various times for IndyMac’s Homebuilder Division, Van Dellen as its president and chief executive, Shellem as chief credit officer, and Koon and Rothman as chief lending officers.
The verdict covered 23 loans, each in the amount of $5 million or more, with most valued upward of $10 million. According to FDIC lawyers, the average principal loss ratio on the loans exceeded 70 percent and went as high as 90 percent in one instance
Judge Dale S. Fischer presided over the month-long trial in U.S. District Court in downtown Los Angeles.
Patrick Richard of Nossaman LLP’s San Francisco office served as lead attorney for the FDIC.
The fundamental issue, Richard said, was “what kind of bankers do we want in this country?” He said the defendants had failed to obtain proper security for repayment of the loans.
“The defendants tried to blame bank regulators and the economy, but the jury got it right,” he said, noting that the amount of the award was almost exactly what FDIC had sought.
Tom Long and David Graeler of Nossaman’s Los Angeles office helped present the case, which they and other attorneys at the firm had worked on since 2009.
Long said that the verdict would “bring accountability to bankers who are not careful with funds that you and I and everyone else place on deposits with banks.”
Richard would not speculate on whether the defendants would appeal the verdict, but said that if they did, he believed they would have a difficult time in light of several of the court’s rulings in their favor.
These included allowing the defendants to introduce evidence about the state of the economy even after the loans in question were approved.
The verdict was criticized by Kirby Behre of Paul Hastings LLP, which represented Koon and Shellem.
Behre said in a statement:
“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. 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.”
Attorneys for Van Dellen were not available for comment.
Copyright 2012, Metropolitan News Company