FDIC’s Embarrassing Secret Settlements Show How Profitable Mortgage Fraud Can Be For Bank Executives

This week we learned that the FDIC has been making secret settlements with banks and their officers for the past several years.  The LA Times discovered the secret deals as part of a Freedom of Information Act request.  The news comes amid a backdrop of deteriorating trust in those entrusted with safeguarding the financial system.  It seems no agency, be it the DOJ, SEC or now even the FDIC is willing to bring criminal prosecutions against the financial institutions running complex control frauds and looting American taxpayers.  The revelations of back-door deals at the FDIC reveal just how profitable mortgage fraud has been for many of these elite white collar criminals.  Bill Black provides the details of how the FDIC has essentially been a co-conspirator, choosing to make deals instead of bringing criminal prosecutions against the executives looting their own firms.

“At least 10 undisclosed settlements involved officers and directors accused  of contributing to the collapse of their own banks. Those include 11 insiders at  Downey Savings & Loan in Newport Beach who paid a total of about $32  million, most of it covered by corporate insurance policies. In the Downey case,  the FDIC announced last year that four of the insiders had agreed to be banished  from banking, including Maurice L. McAlister, Downey’s co-founder, who died Feb.  13.

But the announcement mentioned nothing about the payments or sanctions  against the seven other former insiders. Out of the $32 million, McAlister was  required to pay $1.93 million out of his own pocket, with the other insiders  paying a combined $1.75 million. Insurers that provided coverage for civil  wrongdoing by officers and directors paid the remaining $28.4 million.

The FDIC also has resolved certain claims involving IndyMac, including a  $1.4-million settlement in May 2011 with the thrift’s former president, Richard  Wohl.”

“The FDIC also may have been emboldened by success in a rare case it took to  trial, according to a recent report from consulting firm Cornerstone  Research.

The trial led to a Dec. 7 federal jury verdict in Los Angeles ordering three  former IndyMac executives to pay $168.8 million for what the FDIC said was  reckless approval of 23 loans to developers and home builders who never repaid  them. It was the highest award possible in the case.

Another FDIC lawsuit, seeking $600 million from former IndyMac Chairman and  Chief Executive Michael Perry, was resolved for a fraction of the claim Dec. 14.  Perry agreed to pay $1 million himself, allowed the FDIC to pursue an additional  $11 million from insurers and agreed to be banned from the industry.

The news was first announced in emails sent to news organizations — not by  the FDIC, but by Perry’s defense attorneys, who considered the outcome a  victory.”

As David Dayen notes in today’s NC follow-up, the actions of Perry’s lawyers publicizing the FDIC settlement tell you everything you need to know about the two-tiered justice system in the U.S. Perry’s lawyers were happy to announce the settlement, because it was leaps and bounds better than what should have happened.

 

aaronlaymanFDIC’s Embarrassing Secret Settlements Show How Profitable Mortgage Fraud Can Be For Bank Executives

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