Byline: Andy Peters
Directors accused of contributing to the collapse of their banks are blaming their accusers.
As the Federal Deposit Insurance Corp. files more lawsuits against former directors of failed banks, a common theme has emerged from the defendants' legal arguments: The FDIC and other regulators are to blame because they repeatedly gave their blessing to the failed banks' business plans.
Mike Perry, a former IndyMac Bancorp chief executive and a defendant in a lawsuit brought by the FDIC, has blasted the agency for its "own failures," including the insolvency of the Deposit Insurance Fund.
Other defendants are making a different argument, asserting that the business decisions they made were expressly approved by the FDIC.
The defendants claim that if the FDIC, staffed by banking experts, was unable to forecast the real estate meltdown, how could community bank directors and officers.
"The FDIC repeatedly and consistently endorsed [Haven Trust Bank's] business plan, financial performance, policies, asset quality and management over the course of the five years preceding" its closure, wrote Theodore Sawicki, a lawyer at Alston & Bird who is representing the directors of the Duluth, Ga., bank, which was closed by regulators in December 2008.
Sawicki, in a Sept. 15 court document filed with the U.S. District Court for the Northern District of Georgia, wrote that the FDIC had even determined that the bank was "fundamentally sound and is in substantial compliance with all laws and regulations."
By itself, blaming regulators is not a legal strategy that should be expected to produce much success, said Tony Powers, a lawyer at Rogers & Hardin LLP who has represented individuals against claims from the Securities and Exchange Commission.
"It's typical that companies try to blame their regulators, but it doesn't work," he said.
Still, some industry observers said they believe the defense has some merit.
"It's unfair to hold outside bank board members accountable for a lack of clairvoyance into these trends when regulators who were better situated and better informed were also blindsided," said Brian Olasov, a managing director at McKenna Long & Aldridge.
David Barr, an FDIC spokesman, said the agency does not comment on pending litigation.
In most of the FDIC's cases in which the accused have submitted reply briefs, the defendants' lawyers do not rely solely on the argument that regulators are at fault.