This is a securities class action against directors and officers of IndyMac Bancorp, Inc. and Earnst & Young, IndyMac's accountants for the class period.
This class action alleges that during the Class Period, defendants issued materially false and misleading statements regarding IndyMac's business and financial results. Specifically, defendants downplayed and concealed IndyMac's growing exposure to non-performing assets, particularly loans in its pay-option adjustable-rate mortgage ("Option ARM") and homebuilder construction portfolios, and made numerous positive representations regarding IndyMac's capital position to alleviate investors' fears concerning IndyMac's capital erosion. As a result of defendants' false statements, IndyMac stock traded at artificially inflated prices during the Class Period, reaching a Class Period high of $24.55 per share in October 2007.
Then on May 12, 2008, IndyMac announced its first quarter 2008 financial results, including a net loss of $184.2 million, or ($2.27) per share, compared with net earnings of $52.4 million, or $0.70 per share, in the first quarter of 2007. On this news, IndyMac's stock dropped to close at $2.32 per share - a two-day decline of $1.11 per share, or 32%, and a decline of 91% from $24.55 per share on October 2, 2007.
According to the complaint, the true facts, which were known by the defendants but concealed from the investing public during the Class Period, were as follows:
(a) IndyMac was not adequately reserving for its losses on mortgage-related assets in violation of generally accepted accounting principles;
(b) IndyMac had far greater exposure to anticipated losses and defaults concerning its book of business related to its homebuilder and Option ARM portfolios than it had previously disclosed;
(c) IndyMac's capital base was not adequate enough to withstand the significant deterioration in the credit and real estate markets and could jeopardize IndyMac's status as "well capitalized";
(d) IndyMac had not adequately reserved for Option ARMs; and
(e) given IndyMac's exposure to the increased volatility in the credit and real estate markets, IndyMac had no reasonable basis to make projections about its earnings.
Name (Stock Symbol)
IndyMac Bancorp Inc.
IndyMac Bancorp Inc. was a bank, primarily known for originating and underwriting nonconforming mortgage loans. The FDIC took over the bank in 2008. It is now known as OneWestBank.
Ernst & Young
Ernst & Young is a professional services firm that performs, accounting, audit and consulting functions.
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