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SEC Complaint Against S. Blair Abernathy

SEC Complaint Against S. Blair Abernathy

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Published by DealBook

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categoriesBusiness/Law
Published by: DealBook on Feb 11, 2011
Copyright:Attribution Non-commercial

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01/14/2012

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5
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222324262728DONALD W. SEARLES, Cal.
Bar
No. 135705
E-mail: searlesd(ji),Secgpv
ROBERTO A. TERCERO, Cal.
Bar
No. 143760
E-mail:
t e r c e r o r ( j i ) , S _ e ~ . g o v
 
NICHOLAS S. CfIUNG, Cal.
BarNo.
192784
E-mail:
c h u n g n i ~ e c . g o v
 
Attorneys for PlaintiffSecurities and Exchange CommissionRosalind R. Tyson Regional DirectorJohn M. McCoy
IIi"
Associats{ Regional Director5670 Wilshire
BOUlevar<!<11
FloorLos Angeles, California
'10036
Telephone: (323) 965-3998FacsImile: (323) 965-3908
UNITED STATES DISTRICT COURTCENTRAL DISTRICT
OF
CALIFORNIA
SECURITIES AND EXCHANGECOMMISSION,Plaintiff,vs.
S.
BLAIR
ABERNATHY,Defendant.Case No.
COMPLAINT
 
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2425262728Plaintiff Securities and Exchange Commission (the "Commission") alleges
as
follows:
JURISDICTION
AND VENUE
1.
This Court has jurisdiction over this action pursuant to Sections 20(b),20(d)(1), and 22(a)
of
the Securities Act
of
1933 ("Securities Act"),
15
U.S.C.
§§
77t(b), 77t(d)(1), and 77v(a). Defendant has directly or indirectly made use
of
themeans or instruments
of
transportation or communication in interstate commerce,or
of
the mails, to engage inthetransactions, practices, and courses
of
businessalleged in this Complaint.
2.
Venue is proper in this district pursuant to Section 22(a)
of
theSecurities Act,
15
U.S.C. § 77v(a), because Defendant resides and transactsbusiness within this district and certain
of
the transactions, acts, practices andcourses
of
conductconstitutingviolations
of
thefederal securitieslawsallegedinthis Complaint occurred within this district.SUMMARY3. This action involves securities law violations committed by
S.
BlairAbernathy ("Abernathy"), the former Executive Vice President and ChiefFinancial Officer
of
IndyMac Bancorp, Inc. ("IndyMac").
4.
IndyMac through its main subsidiary-IndyMac Bank, F.S.B.("IndyMac Bank" or "the Bank") -primarily made, purchased, and sold residentialmortgage loans. In July 2008, IndyMac Bank was placed under Federal DepositInsurance Corporation ("FDIC") receivership and IndyMac filed for bankruptcyprotection.A. False
and
Misleading Statements
in the
Offer
and
Sale
of
IndyMac's
Residential Mortgage-Backed Securities
in
2007
5.
In 2007, IndyMac Bank conducted six offerings totaling $2.5 billion
of
residential mortgage-backed securities ("RMBS"). RMBS are securitizations
of
pools
of
loans, andRMBSinvestorsreceivepaymentsout
of
theprincipaland
1
 
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interest that residential loan borrowers pay on the underlying loans. Each
of
thosesix offerings, however, misrepresented the quality
of
the loans underlying eachoffering. Prior to and during the RMBS offering period, Abernathy receivedinternal monthly reports showing that 12% to 18%
of
a random sample
of
IndyMacBank's loans contained misrepresentations regarding important information aboutthe loans' characteristics (such
as
a loan's status as an owner-occupied loan or itsloan-to-value ("LTV") ratio) and/or the borrowers' creditworthiness (such as aborrower's identity, income, or debt load). Despite receiving those monthlyreports showing that a significant percentage
of
loans containedmisrepresentations, Abernathy negligently failed to take reasonable or responsiblesteps to ensure that the RMBS offering documents, which had been prepared byinside and outside counsel, included accurate disclosures concerning the loans inthe RMBS or notified investors that the presented information was materiallymisleading in light
of
IndyMac Bank's monthly reports. Abernathy authorizedand/or signed Commission filings relating to these offerings. These six offeringshave experienced substantial loan delinquencies and ratings downgrades.B. False
and
Misleading Statements Regarding
IndyMac's
DeterioratingFinancial Condition
in
2008 Stock Sales
6.
In 2008, Abernathy was negligent in not knowing that IndyMac'soffering documents for stock sales through the Direct Stock Purchase Program("DSPP") contained false and misleading disclosures concerning IndyMac'sfinancial condition. Although Abernathy regularly received information regardingIndyMac's deteriorating financial condition, Abernathy negligently failed to takesteps to disclose this information to investors. Instead, he authorized IndyMac'scommon stock offering materials that made false and misleading statementsregarding IndyMac's liquidity position and IndyMac's need to raise capital to keepIndyMac Bank "well capitalized." IndyMac disclosed its liquidity problems in its
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