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.
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