DEC 17, 2012 11:11am ET

Former IndyMac CEO and FDIC Agree to $12 Million Settlement

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Former IndyMac Bank chief executive Michael Perry has settled claims with the Federal Deposit Insurance Corp., although the amount owed to the FDIC is far less than what the agency first sought.

The $12 million deal includes $1 million paid directly by Perry, and as much as $11 million coming from insurers that back professional liability claims. In addition, Perry agreed to a lifetime ban from the industry.

The agency determined that Perry's "practices" in running IndyMac "demonstrate respondent's unfitness to serve as a director, officer, person participating in the conduct of the affairs, or as an institution-affiliated party of the bank" as well as of "any other insured depository institution," the agreement said.

Yet the damages pale in comparison to the FDIC's original $600 million lawsuit against Perry in 2011, alleging negligence in running the $32-billion-asset institution that collapsed in one of the biggest failures of the crisis. IndyMac was the first large FDIC-insured mortgage lender to be seized during the housing crash, and its failure produced the biggest depositor losses of any failed bank during the crisis.

But in a statement late Friday, Perry's attorney called the FDIC's original "simple negligence" claim against Perry "baseless."

The agency alleged "that Mr. Perry should have had a crystal ball, seen the financial crisis coming and stopped making loans sooner than IndyMac did," said D. Jean Veta, a partner at Covington & Burling.

The settlement comes just two weeks after the FDIC, which had estimated losses from IndyMac's failures at $12 billion, prevailed in a jury trial against three former IndyMac executives found guilty of contributing to more than $168 million in loan losses. (After each failure, the FDIC is authorized to investigate potential negligence claims against former officers and directors in order to recoup losses for the Deposit Insurance Fund.)

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