Treasury Declares Infusion Backdating to Be Inappropriate

The Treasury Inspector General has concluded that the backdating of capital infusions into six federally chartered thrifts was "inappropriate" and allowed misleading financial reporting by the thrifts. The Office of Inspector General's investigation of the backdating incidents has already resulted in the Office of Thrift Supervision placing two high ranking officials on administrative leave. "We consider these matters very serious and find it alarming that such high level OTS officials were not only aware of the backdating at two thrifts, but either directed or authorized the thrifts to backdate these contributions," said OIG audit director Susan Barron in a report. One case involved the failed IndyMac Bank in Pasadena, Calif. Its holding company made an $18 million capital contribution on May 9, 2008 that was included in the thrift's first quarter financial report. IndyMac was closed in July after a run on the bank. OTS spokesman William Ruberry said all six transactions would have been acceptable under the accounting rules if a "valid note receivable" had been recorded. He noted that OTS has taken the "necessary actions" to address the IG's concerns.