IndyMac ex-chairman says he was told to backdate cash infusion
The former chairman of IndyMac Bank has alleged a key banking regulator “specifically directed” him to backdate $18 million in capital onto the Pasadena thrift’s books to help prop up the company at the peak of the financial crisis.
Michael W. Perry, who is battling fraud allegations connected to the thrift’s failure in 2008, said that cash was added to the balance sheet during the first quarter of 2008 even though the money arrived more than a month after the quarter closed. The regulator was Darrel W. Dochow, former Western regional director for the Office of Thrift Supervision, a U.S. Treasury Department agency that “had the final say regarding IndyMac Bank’s capital levels,” Perry said in a statement posted online.
After conferring with IndyMac’s auditors on May 9, 2008, Dochow approved adding the $18 million to IndyMac’s books, and “specifically directed Mr. Perry to amend the Bank’s Thrift Financial Report for March 31, 2008,” the statement said. IndyMac’s first-quarter earnings report to investors, issued May 12, also included the extra dose of cash.
Dochow’s approval of the cash infusion had been widely reported previously. But Perry’s contention that Dochow “directed” its inclusion on IndyMac’s books adds a new twist to his defense by suggesting that the action was required by regulators. The statement from Perry was first reported by the New York Times.
Perry declined to comment beyond the statement on his website. Dochow could not be reached for comment.
The money in question came from IndyMac Bancorp, the parent of the thrift, where Perry was also chairman and chief executive. IndyMac Bancorp had already provided $70 million to prop up the bank during the first quarter, and Dochow and the accountants decided that it could pump more money into the struggling bank.
Without the infusion, IndyMac would have lost its “well capitalized” status, triggering devastating regulatory sanctions including divestment of billions of dollars in much-needed deposits brought in by outside brokers.
The extra reported capital helped IndyMac stay afloat until July 2008, when a run on deposits caused it to fail in one of the earliest and largest implosions of the mortgage industry meltdown. The Federal Deposit Insurance Corp. estimated that losses to its insurance fund totaled $12.95 billion.
In a securities-fraud lawsuit filed last February, the Securities and Exchange Commission accused Perry and two top aides of misleading investors about the deteriorating finances at IndyMac. The bank had been the nation’s largest writer of low-documentation and no-documentation mortgages during the housing boom.
In an unusual cyberspace counteroffensive, Perry in September set up a blog, nottoobigtofail.org, where he aggressively defends himself against the SEC action and lawsuits filed by the FDIC and private litigants.
Among the postings on the blog is a 38-page letter that IndyMac attorneys sent to the SEC on June 2, 2010, in an unsuccessful attempt to dissuade the agency from suing Perry. The description of Dochow directing the accounting changes is in that letter.
