While foreclosures march ahead IndyMac too continues to suffer

Author: Adam Smith

Author: Adam Smith

While foreclosures march ahead, IndyMac too continues to suffer with the latest pain being class action legal suit. The problems of Pasadena based IndyMac Bancorp Inc. have worsened with each passing day. Recently the suit was filed in USA District Court of California on behalf of the shareholders of IndyMac. The bank is accused of giving out false statements that led to the artificial inflation of its stock price. The suit focuses on the CEO of the bank Michael W. Perry and the Chief Financial Officer of the bank A. Scott Keys. It is alleged that the defendants released materially false and misleading statements regarding the companys business and financial results. The activities of the banks as regards non-performing assets like exotic loans with pay options, ARMs and the like was not given importance but rather kept hidden. Consequently IndyMac traded in stock at falsely inflated rates during a certain period. At that time it touched $24.55 per share (October 2007). The official of the bank declined to make any comments contending that it cannot do so when litigation is pending. The shares of IndyMac hit a record low since the last 52 weeks calculating to $1.58 per share as noted on the New York Stock Exchange. During this period the shares of the bank had fluctuated between $33.85 and $1.70. The very question of the survival of IndyMac is at stake. Equity expert Jason Arnold of RBC Capital Market has grave doubts. He said, If the economy erodes further from here it will probably get worse for them. I wouldnt rule out receivership. My gut feeling is that they wont pull themselves out of this unless something changes dramatically over the near term. Without a generous dose of injection coming from some investor survival of IndyMac will remain a critical problem. Arnold was not surprised that a class-action law suit has been initiated. He explained, Any time a stock falls beyond 80 to 90 percent of its value these class-action litigators show up. When companies are under duress, whether its their own fault or something industry-wide, this comes up a lot. In an earlier interview Michael W. Perry, the CEO, voiced his dissatisfaction at the problems that has beset the industry causing IndyMac to struggle with the same. In 2008 the problems had intensified. Pointing to 2007 he said, It was bad from beginning to end. We started the year missing our forecast for the fourth quarter of 2006. But that was nothing compared to the way the year progressed.About the Author:

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