Three former officers of IndyMac Bank FSB's homebuilder division were found liable by a jury on Friday for more than $168 million for negligently lending to developers who were unlikely to repay millions of dollars in loans.
The Federal Deposit Insurance Corp brought a civil lawsuit against the officers in 2010 in its capacity as receiver for the now-defunct IndyMac. The agency alleged that the officers of "significant departures from safe and sound banking practices" in an attempt to rev up IndyMac's loan production despite warnings about an imminent market decline.
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Following a 16-day trial in California federal court, jurors found three former officers - Scott Van Dellen, Richard Koon and Kenneth Shellem - liable for negligence and breach of fiduciary duty in connection with 23 loans, according to the verdict sheet. Jurors found that all three men should pay $168.1 million in damages.
A fourth defendant, William Rothman, settled the claims against him in October for $4.75 million.
FDIC general counsel Richard Osterman said in a statement that the agency was pleased with the verdict. "While most of our cases have settled short of trial, we remain committed to pursuing actions where necessary to maximize recoveries and hold those responsible for losses to failed financial institutions accountable," he said.
Attorney Kirby Behre, who represented Shellem and Koon, called the verdict 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 many, many other financial institutions."
California-based IndyMac, which specialized in a type of mortgage that often required minimal documentation from borrowers, was seized by banking regulators in July 2008 as the financial crisis gathered steam.
Its failure cost the FDIC, which stands behind bank deposits, an estimated $12.8 billion.
Lawyers for Van Dellen could not be immediately reached for comment Friday evening. The case is FDIC v. Van Dellen et al, in the U.S. District Court for the Central District of California, no. 10-4915.
(Reporting by Jessica Dye; Editing by Lisa Shumaker)