Ariel Investments LTD, Et Al. V. Indymac Bancorp, Inc., Et Al. Ariel

1 Arthur L. Shingler III SCOTT + SCOTT LLP 2 5455 Wilshire Blvd. Suite 1800 Los Angeles CA 96036 -41 3 Tel: 213/985-1274 Fax: 2131985 - 1278 4 ashingler@scott-scott .com r .._

5 David R. Scott ° SCOTT + SCOTT LLP "~ .. 6 PO Box 192 108 Norwich Avenue : ; ^? 7 Colchester CT 06415 r,. r Cn Tel: 860/537 -5537 CD 8 Fax: 860/537-4432 [email protected] 9

10 Attorneys for Plaintiff

12 UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA 13 WESTERN DIVISION 14 ARIEL INVESTMENTS LTD., on CLASS ACTION NO: 15 Behalf of Itself and All Others Similarly Situated, . C V 0 8 - 0 43 0 2 41 LAX 16 Plaintiffs, COMPLAINT FOR VIOLATION OF 2/S 17 THE FEDERAL SECURITIES LAWS vs. 18 2-0 INDYMAC BANCORP, INC., 19 MICHAEL W. PERRY and A. SCOTT KEYS, 20 DEMAND FOR JURY TRIAL Defendants. Lr 0 21 22 23

28 1 JURISDICTION AND VENUE 2 1. Jurisdiction is conferred by §27 of the Securities Exchange Act of 1934 3 (the "Exchange Act"). The claims asserted herein arise under §§ 10(b) and 20(a) ofthe 4 Exchange Act and SEC Rule I Ob-5. This Court has jurisdiction over the subject matter 5 of this action under 28 U.S.C. § § 1331 and 1337, and §27 of the Exchange Act. 6 2. Venue is proper here pursuant to §27 of the Exchange Act and 28 U.S.C. 7 § 1391. IndyMac Bancorp, Inc. has sufficient minimum contacts with the Central 8 District of California because many of the false and misleading statements were made 9 in or issued from this District and. IndyMac has a substantial presence in California and 10 is headquartered in Pasadena, California. 11 3. In connection with the acts and conduct alleged herein, defendants,

12 directly or indirectly, used the means and instrumentalities of interstate commerce,

13 including, but not limited to, the United States mails and the facilities of the national

14 securities markets. 15 NATURE OF THE ACTION 16 4. Plaintiff, Ariel Investments Ltd. ("Plaintiff'), individually and on behalfof 17 all other persons similarly situated, by Plaintiffs undersigned attorneys, for Plaintiffs 18 complaint against Defendants, alleges the following based upon personal knowledge as 19 to Plaintiff and Plaintiff's own acts, and upon information and belief as to all other 20 matters based on the investigation conducted by and through Plaintiff's attorneys, 21 which included, among other things, a review of the defendants' press releases, 22 Securities and Exchange Commission ("SEC") filings by IndyMac Bancorp, Inc. 23 ("IndyMac" or the "Company") and media reports about the Company. Plaintiff 24 believes that substantial evidentiary support will exist for the allegations set forth 25 herein after a reasonable opportunity for discovery. 26 5. This is a securities class action on behalf of Plaintiff and all other persons 27 or entities, except for defendants, who purchased or otherwise acquired IndyMac (the 28 "Class") securities during the period August 16, 2007 through May 12, 2008, inclusive

1 (the "Class Period"), seeking to pursue remedies under the Securities Exchange Act

2 11 1934 (the "Exchange Act"). 3 6. During the Class Period, IndyMac and certain of its officers and/ 4 directors entered into a manipulative scheme to defraud investors. Specifically, 5 defendants issued materially false and misleading statements regarding the Company's 6 capital base, reserves, business prospects and financial results. As a result of the 7 defendants' scheme, IndyMac's stock traded at artificially inflated prices during the 8 Class Period, reaching a high of $24.55 per share on October 2, 2007. 9 7. IndyMac, through its savings and loan/mortgage banker subsidiary 10 IndyMac Bank, F.S.B., is one of the largest residential mortgage lenders in the U.S. 11 The Company's core business involves its mortgage professionals group, which 12 originates and buys mortgages through third parties such as mortgage brokers and 13 homebuilders throughout the U.S. IndyMac also offers retail banking services through 14 more than 30 southern California branches. 15 8. Prior to the Class Period, IndyMac specialized in ri sky "Alt-A" mortgages. 16 Alt-A mortgages are loans requiring less income documentation than mortgages 17 saleable to government-sponsored enterprises ("GSEs" ), such as Fannie Mae and 18 Freddie Mac. The Company also issued Option ARMs, which is a type of an adjustable 19 rate mortgage whose rate adjusts monthly, based on an index added to a margin rate. 20 9. With its focus on the Alt-A and Option ARMs, in 2007, IndyMac was 21 highly exposed to the subprime mortgage crisis and downturn in the real estate 22 homebuilding markets . As a result of the crisis, delinquencies on Alt-A mortgages 23 Option ARMs continued to rise and investors in the secondary market stopped bur 24 these loans from lenders . During the Class Period, defendants concealed 25 Company's exposure to its high-risk mortgage portfolio and repeatedly ass 26 investors that the Company had adequate loss reserves and a strong capital base. 27

28 10. In August 2007, the credit and mortgage crisis forced IndyMac to change

-2- 1I its focus from nontraditional mortgages, such as Alt-A mortgages, to mortgages 21 saleable to GSEs. However, defendants continued to repeatedly assure investors the 3 Company was a "safe and sound" financial institution with "strong levels of capital 4 and liquidity." 5 11. Despite growing delinquency numbers as 2007 came to a close, 6 defendants continued to conceal IndyMac's growing exposure to its nontraditional 7 mortgage assets. Typically, a non-performing asset is a loan that is in default or S close to being in default. According to IndyMac, a non-performing loan is one that 9 has been delinquent in excess of 90 days. Despite the growing amount of non-- 10 performing loans on the Company's balance sheet, defendants failed to maintain 11 adequate reserves to cover these anticipated losses and failed to disclose the 12 Company's exposure to non-performing loans in a timely manner. 13 12. In addition , defendants made several misrepresentations regarding the 14 Company' s capital position during the Class Period. Defendants repeatedly assured 15 investors that IndyMac was "well-capitalized" as required by the Office of Thrift 16 Supervision. As a thrift, the Company's bank unit is required to maintain a risk- 17 based capital ratio of 10% in order to be considered "well-capitalized " under the 18 Office of Thrift Supervision ' s federal regulations. 19 13. However, on May 12, 2008, IndyMac shocked investors by announcing 20 that the Company lost $184 million in first-quarter of 2008 and that it could not 21 make any guarantees that the Company would remain "well-capitalized" throughout 22 the credit crisis. The Company also announced it would have to suspend dividend 23 payouts on certain stock in order to raise capital. In a corresponding press release 24 issued that day, the Company stated, in relevant part:

26 IndyMac Bancorp, Inc. ("Indymac®" or the "Company"), the 27 holding company for IndyMac Bank, F.S.B. ("Indymac 28 Bank®"), today reported a net loss of $184.2 million, or ($2.27)

-3- 1 per share, for the first quarter of 2008, compared with net 2 earnings of$52.4 million, or $0.70per share, in thefirst quarter 3 of2007. 4

5 "While many others in the mortgage finance industry saw

6 worsening losses during the first quarter given the current state

7 of the housing and credit markets, we achieved a 64 percent

8 reduction in our net loss from last quarter as we took the

9 appropriate steps in the second half of last year to get the bulk

10 of our credit costs behind us," stated Michael W. Perry,

11 Indymac's Chairman and CEO. "Last quarter, we took major

12 write-downs and established significant credit reserves in the

13 fourth quarter of 2007, absorbing $863 million in total pre-tax

14 credit provisions/costs during that quarter and building our total

15 credit reserves for future losses by 71 percent during the quarter

16 to $2.4 billion at December 31, 2007, a four fold increase from

17 $619 million at December 31, 2006. With those reserves in

18 place, we were able to reduce our total credit provisions/costs to

19 $249 million in the first quarter of 2008, a 71 percent reduction

20 from last quarter, allowing us to reduce our overall net loss this

21 quarter. It is important to also understand that 24 percent of our

22 first quarter loss is from staff reduction severance and office 23 closing costs, and another 22 percent is from business activities

24 that we have permanently closed and where losses are expected

25 to diminish over time, such as homebuilder construction

26 lending, home equity lending and our conduit channel."

-4- "We also continued to build our total credit reserves to $2.7 2 billion, a 13 percent increase over last quarter and more than a 3 three-fold increase over $813 million in Q1-07. Actual realized 4 credit losses during the first quarter totaled $334 million, such 5 that the Company's total reserves at March 31, 2008 equate to 6 8.0 times current quarterly realized credit losses. Excluding 7 non-investment grade and residual securities, total Q 1-08 realized 8 credit losses were $178 million, and the total related credit reserve 9 at March 31 was $1.3 billion, or 7.2 times the realized credit losses 10 in the first quarter.

12 "As I have been saying for the past year," continued Mr. Perry, 13 "safety and soundness remains our highest priority during these 14 challenging times, and we finished the first quarter again in a 15 solid overall financial position. Our capital levels continue to 16 exceed the levels defined as 'well capitalized' by our regulators. To 17 supplement the $676 million of equity capital we prudently raised 18 in 2007, we recommenced raising equity capital through our Direct 19 Stock Purchase Plan (DSPP) on February 26, 2008 and raised $39 20 million in new equity through March 31, 2008. We are 21 continuing to raise capital nearly every business day through 22 the DSPP and have raised $97 million through this program 23 year to date through May 9. At March 31, 2008, Indymac 24 Bank's Tier 1 `core' capital ratio was 5.74 percent, our Tier 1 25 risk-based ratio was 9.00 percent, and our total risk-based 26 capital ratio was 10.26 percent, above the `well-capitalized' 27 regulatory levels of 5.00 percent, 6.00 percent and 10.00 28 percent, respectively.

-5- 1

2 "With respect to profitability, we do not expect that Indymac 3 will be able to return to overall profitability until the current 4 decline in home prices decelerates. As it is uncertain that this 5 will happen in 2008, we are not currentlyforecasting a return to 6 profitability this year."

8 "We do not at this time forecast a return to overall 9 profitability in 2008 given current market conditions, but we 10 do forecast significantly declining losses each quarter for the 11 balance of the year, as our restructuring charges abate, credit 12 provisions/costs and losses from discontinued operations 13 decline, and the profits from our new business model grow," 14 concluded Mr. Perry. 15 [Emphasis Added.] 16

17 14. On May 12, 2008 , IndyMac held a corresponding earnings conference 18 call to discuss its first quarter 2008 results with investors and analysts: 19

20 [PERRY]: On the negative side, we do not expect IndyMac to 21 return to overall profitability realistically until these home 22 price declines start to decelerate. As it clearly is uncertain 23 when that will happen, we are not forecasting conservatively a 24 return to profitability in 08 , but as I said, the losses will be 25 down substantially and manageable. 26

27 * * *

-6- 1 On the negative side, because we 're one of the few pure 2 mortgage bankers out there and because ofthe significant hits 3 we've taken, our capital ratios clearly have been depleted, and 4 you 're limited to one-times your regulatory core Tier 1 capital in 5 capitalized servicing, and we hit that cap a little bit in the fourth 6 quarter, and a lot more in the first quarter. 7

8 The bottom line is as a result, it's causing us to deduct $117 9 million , essentially if you're over the one-time cap you have to 10 deduct the servicing asset dollar for dollar from all of your capital

11 ratios. 12 * *

13 The bottom line is we think that's a little perverse given the fact 14 that we have earned strong hedge returns for years, and that asset, 15 and it's our best performing asset. But it is what it is, and it's 16 affecting our capital in the first quarter. 17

18 Also, as a result of our loss , the servicing cap penalty and also we 19 have loan loss reserves , general loan loss reserves, that are only 20 allowed to be counted to capital equal to 1.25% of your total 21 assets and we have about double that amount. So as a result of 22 that, our total risk-based capital ratio was relatively close to the 23 well-capitalized minimum . It was 10 .26. The ratio there is 10. 24 Clearly, there are scenarios in this environment where we could 25 not be well- capitalized and end up being adequately capitalized 26 for a short period oftime. 27

-7- 11-N, 1-11

I The last issue here, which is not a new issue, ever since we 2 became a thrift back in 2000, we've always informally agreed to 3 keep a higher capital ratio than the 5 and the 10, and we're 4 working our way back up to that. Right now our current plan 5 shows that we will get our capital ratios back up to 7 and 11 by 6 the end of the year. 7

8 The negative is that our nonperforming assets have continued 9 to rise, much like all thrifts. Non-performing single family 10 loans take a long time to work through your balance sheet. 11 They don't become nonperformers until 90 days and you often 12 can't foreclose on those properties for many months later, and 13 then we're selling as soon as we get possession of the property, 14 we're getting those REOs off our books within six months or

15 less. 16

17 But because of the cycle time that it takes to move through a 18 single-family non-performer, you can see that our non- 19 performers have grown to 6.51 % at March 31, but that rate is 20 slowing. That rate of increase from the fourth quarter to the 21 first quarter was 39%, down from an 82% increase from the 22 third to the fourth, and we're projecting that MPA growth rate 23 to continue decline to 21% in the second quarter to 6% in the 24 third, and basically be flat in the fourth and then decline from 25 there and I think we've been pretty accurate at forecasting those 26 NPAs. 27 [Emphasis Added.] 28

-8- AI^N

1 15. On this news, IndyMac's stock dropped from $3.43 per share on May 9, 2 2008 to a closing price of $2.32 per share on May 13, 2008 , on extremely high 3 trading volume - a two-day decline of 32%. Overall, IndyMac shares declined 91 % 4 from $24.55 per share on October 2, 2007. 5 16. Leading up to the May 12, 2008 disclosure and extending through the 6 Class Period, defendants made false statements and/or failed to disclose material 7 ladverse facts known to them and concealed them from the investing public. 8 Specifically, defendants falsely reported or failed to disclose the following: 9 (a) The extent of the Company's exposure to anticipated losses and 10 defaults related to its homebuilder loans, Option ARM portfolio and other non- 11 performing assets than it had previously disclosed; 12 (b) IndyMac's capital base was inadequate considering the 13 Company's loss exposure and could jeopardize the Company's status as "well- 14 capitalized"; 15 (c) IndyMac set aside inadequate reserves for Option ARMs and its 16 other non-performing assets, thereby inflating the Company ' s earnings; and 17 (d) IndyMac falsely reported that its financial statements were 18 prepared in accordance with Generally Accepted Accounting Principles ("GAAP"); 19 and 20 (e) Given the extent of the Company's exposure to the increasingly 21 volatile credit and real estate markets and its capital base, the Company had no 22 reasonable basis to make projections about its earnings. As a result, the 23 Company's earnings projections issued during the Class Period were, at a 24 minimum, reckless. 25 17. As a result, the Company's financial statements during the Class Period 26 were materially false and misleading and the Company's stock traded at artificially 27 inflated levels . Because of defendants' wrongful acts and omissions and the 28 resultant sharp 91% decline in the value of IndyMac's stock, Plaintiff and other

-9- 1 Class members have suffered significant losses and damages. 2 THE PARTIES 3 18. Plaintiff, Ariel Investments Ltd., purchased IndyMac securities at prices 4 that were artificially inflated as a result of defendants' fraud during the Class Period. 5 Plaintiff was damaged as the truth became revealed, and the artificial inflation was 6 removed from the Company's stock price. Plaintiff's purchases, sales and losses are

7 I set forth in the accompanying certification, which is incorporated by reference 8 herein. 9 19. Defendant IndyMac operates as the holding company for IndyMac 10 Bank, a thrift/mortgage bank, which provides mortgage products and services in the 11 United States. IndyMac Bank provides financing for the acquisition, development, 12 and improvement of single-family homes. The Company also provides financing 13 secured by single-family homes and other banking products to facilitate consumers' 14 personal financial goals. The Company facilitates the acquisition, development, and 15 improvement of single-family homes through the electronic mortgage information 16 transaction system platform that automates underwriting, risk-based pricing and rate 17 locking via the Internet at the point of sale. The Company operates in two segments, 18 Mortgage Banking and Thrift. IndyMac is headquartered in Pasadena, California. 19 20. Defendant Michael W. Perry ("Perry") is, and at all relevant times was, 20 Chairman of the Board of Directors and Chief Executive Officer ("CEO") of IndyMac 21 and IndyMac Bank, F.S.B. 22 21. Defendant A. Scott Keys ("Keys") was, at relevant times, Executive Vi 23 President and Chief Financial Officer ("CFO") of IndyMac, until April 25, 2008, wh 24 defendant Keys took a medical leave of absence. 25 22. Defendants Perry and Keys are referred to herein collectively as tl 26 "Individual Defendants." The Individual Defendants possessed the power and authori 27 to control the contents of IndyMac's financial reports, press releases and presentati 28 to securities analysts, money and portfolio managers and institutional investors.

-10- APIN

1 were provided with copies of the Company' s reports and press releases alleged herein 2 to be misleading prior to or shortly after their issuance and had the ability and 3 opportunity to prevent their issuance or cause them to be corrected. 4 23. Because of their positions and access to material non-public information 5 available to them but not to the public, each of these Individual Defendants knew that 61 I the adverse facts specified herein had not been disclosed to and were being concealed 7 from the public and that the affirmative representations which were being made were 8 then materially false and misleading. The Individual Defendants are liable for the false 9 statements pleaded herein, as each was either made by the particular Individual 10 Defendants or were "group-published" information, the result of the collective actions 11 of the Individual Defendants. 12 SUBSTANTIVE ALLEGATIONS 13 24. On August 16, 2007, IndyMac on its weblog IMBreport, which can be 14 found within the Company's website, posted an entry entitled "S&P Affirms 15 IndyMac's Stable Outlook and Investment Grade Rating," which stated in part: 16

17 Standard & Poor's affirmed IndyMac' s stable outlook and 18 investment grade rating today, August 16th, 2007. While we 19 don't rely on these ratings to fund ourselves (because we fund our 20 business predominantly with deposits and Federal Home Loan 21 Bank Advances) we think the below excerptfrom S&P's report 22 clearly speaks to our strongfinancial position: 23

24 "Unlike many of its competitors in the mortgage finance sector, 25 IndyMac has depository funding and access to FHLB advances, 26 which provide it with continued access to readily available 27 sources ofunsecured liquidity. In addition, IndyMac has managed 28

-11- 1 its secured funding prudently to avoid margin or collateral calls 2 from its lenders." 3

4 "The deteriorating liquidity environment persuaded management

5 to both decrease its origination targets and shift its production mix

6 to be weighted heavily toward agency eligible loans. This allows

7 loans to be sold directly to the agencies, thus reducing IndyMac's

8 need to fund them."

9 [Emphasis Added.] 10

11 25. Upon this news, IndyMac's shares jumped $2.26 per share to close

12 $22.36 per share on August 17, 2007 - a one-day increase of 11% on high volume.

13 26. On August 22, 2007, IndyMac issued a press release entitled "IndyM

14 Announces Return to the Prime Jumbo Home Loan Market," which stated in part: 15

16 IndyMac Bank, F.S.B. ("IndyMac Bank" or "IndyMac®"), the 17 principal subsidiary of IndyMac Bancorp, Inc. (IMB), today 18 announced it is once again originating prime, single-family 19 residential, full documentation jumbo loans after temporarily 20 reducing the origination of this product due to current illiquidity in 21 the secondary market. 22

23 "Given our strong financial position, we are fully committed to 24 the market for prime jumbo home loans," commented Michael

25 W. Perry, IndyMac's Chairman and CEO. "Until the secondary

26 market recovers, we plan to retain this product in our investment

27 portfolio at what we believe will be attractive returns." 28

-12- 1 [Emphasis Added.] 2

3 27. On August 24, 2007, IndyMac posted a blog entry on IMBReport entitled

4 "Update on Delinquencies in Our Mortgage Loan Servicing Portfolio," which stated in

5 part: 6 Overall delinquencies rise modestly in July 7 Data on the performance of Indymac's servicing portfolio for 8 the month of July is now available. The portfolio grew from 9 $184 billion to $187 billion during the month, with most of this 10 growth coming from an increase in prime, first lien loans. As 11 we expected, total 30+ day delinquencies for the total portfolio 12 have increased slightly from 5.35% to 5.46%, an increase of 11 13 basis points. 14

15 Delinquencies in our subprime first lien loans, which account

16 for 3% of our portfolio, decreased from 22.52% to 22.44%, or

17 eight basis points. While it is too early to consider this a trend,

18 it is certainly an encouraging development to see the leveling

19 off in delinquencies for our subprime portfolio. We are no

20 longer originating subprime loans except for those that are

21 saleable to the GSEs. What is very clear again is that our prime

22 mortgages, which represent 93% of our total servicing portfolio, 23 perform almost five times better than our subprime book. 24

26 Indymac's Alt-A loan loss rate continues to be significantly 27 below the industry. 28

-13- n

1 28. On August 28, 2007, IndyMac issued a press release entitled "IndyMac 2 Expands Its Retail Lending Group Nationwide - Hires Over 600 Former American 3 Home Mortgage Retail Lending Professionals ," which stated in part:

5 IndyMac Bank, F.S.B. ("IndyMac Bank®" or the "Company"), 6 the principal subsidiary of IndyMac Bancorp, Inc. 7 ("IndyMac®"), today announced that it has hired over 600 8 former American Home Mortgage Investment Corp. ("AHM" or 9 "American Home") retail lending professionals who were 10 recently terminated by them. These retail lending professionals 11 specialize in prime conforming, FHA/VA and other agency 12 eligible single-family mortgage products. The Company is in 13 discussions to hire additional former AHM employees and 14 anticipates that it will end up hiring 750 to 850 former AHM 15 employees in total.

17 These recent moves will bring our total RLG [Indymac Bank's 18 Retail Lending Group] workforce to almost 1,500 employees, 19 up from 13 one year ago. In this market, we made a prudent 20 trade by cutting out roughly $5 billion per quarter of low 21 margin, Alt-A conduit business to make room for growth in 22 higher margin retail business, and we anticipate the total 23 quarterly loan production of the RLG will reach roughly $1.5 24 billion by the fourth quarter of this year."

26 Commenting on IndyMac's overall operations in light of current 27 conditions in the secondary market for mortgages, Michael W. 28 Perry, Chairman and CEO, stated, "We are very fortunate to be

-14- 1 structured as a federally-insured depository with all of our 2 assets and loan production harbored within IndyMac Bank. 3 With this structure, more than 90% of our funding is currently 4 composed of deposits, Federal Home Loan Bank advances, long 5 term debt and equity, and IndyMac has limited exposure to the 6 current marketrelated liquidity issues that many other mortgage 7 lenders are experiencing. We had $3.5 billion of operating 8 liquidity at June 30, 2007, and we expect that our operating 9 liquidity will be over $4 billion at September 30 as we continue 10 to grow our deposit base. Nonetheless, we have rapidly shifted 11 the mix of our mortgage production in light of the current 12 secondary market. Whereas in Q207 40 percent of our 13 production was sold to the GSEs, the SFR permanent mortgage 14 loans we are originating today are 90 percent GSE-eligible. In 15 addition, we continue to originate high quality jumbo mortgages 16 through all our channels. 17

18 "While we project that our overall mortgage volumes will be 19 down substantially in the fourth quarter as we and all lenders 20 have tightened guidelines, our fourth quarter mortgage banking 21 revenue margins are presently forecasted to increase. That said, 22 while we have significantly staffed up our retail lending 23 platform, which we expect will quickly contribute to 24 profitability, we will need to carefully monitor our overall 25 production volumes to see where they settle in light of mortgage 26 market conditions and ensure that our overall staffing levels are 27 in alignment with our production levels." 28

-15- 1 [Emphasis Added.] 2

3 29. On September 7, 2007, Perry addressed a letter to IndyMac 4 shareholders, which stated in part: 5

6 Dear shareholders and other IndyMac stakeholders: 7 Yesterday, we paid the third quarter dividend on our common 8 stock of $0.50 per share, and, as we are two-thirds of the way 9 through the third quarter, I wanted to take this opportunity to 10 update you on our current performance. 11

12 In our second quarter earnings release, we said that the second

13 half of 2007 and 2008 would continue to be challenging for the

14 mortgage and housing markets and for IndyMac. In fact, the

15 mortgage and housing markets are very difficult, and the private

16 secondary markets have significantly worsened. The illiquidity

17 in the secondary markets, and consequent significant and abrupt

18 spread widening for all mortgage products except those saleable

19 to the GSEs, have negatively impacted the profitability of our

20 mortgage production division. As a result,. we currently expect

21 that IndyMac will report earnings for the third quarter in a

22 range of breakeven to a loss of $0.50 per share, driven mainly 23 by the spread widening and a continued high level of credit

24 costs. It should be noted that the impacts of spread widening

25 and increased credit costs have been recorded almost

26 exclusively as unrealized fair value adjustments as opposed to

27 actual losses realized on the disposition of assets. As such,

28 future gains could be realized on these assets if market

-16- 1 conditions improve. We do anticipate that this quarter will 2 represent the trough for our earnings during this current down 3 cycle, as we have largely converted our mortgage production to 4 a GSE-eligible model, which is not susceptible to the kind of 5 spread widening we have experienced this quarter. Therefore, it 6 is unlikely we will get hit with both the negative impact of 7 extraordinary spread widening and higher than normal credit 8 costs in future periods as we have been this quarter. 9

10 Given our current earnings forecast for the quarter and the 11 payment of the dividend, we expect that we will end the quarter 12 with book value per share of approximately $27.00. We also 13 expect to end the quarter with roughly $35 billion in total 14 assets; operating liquidity of $5.0 billion versus $3.5 billion at 15 June 30, 2007 (we currently have no extendable, asset-backed 16 commercial paper liabilities outstanding and expect to have no 17 reverse repurchase borrowings at quarter-end); and Tier I core 18 and risk-based capital ratios of roughly 7.75 percent and 11.5 19 percent, respectively, with both ratios being in excess of "well 20 capitalized" regulatory standards. 21

22 Although there is still a great deal of uncertainty in the mortgage 23 and housing markets such that earnings remain very difficult to 24 forecast with any degree of accuracy, I do expect IndyMac to be 25 solidly profitable in both Q4-07 and in 2008. Given the current 26 operating environment and our anticipated earnings performance, 27 1 believe it is prudent to assess our current common stock 28 dividend payout, and I plan to recommend to the Board of

-17- 1 Directors that we reduce our quarterly dividendpayout to $0.25 2 per share for the time being. Our Board of Directors will still 3 need to evaluate and approve this proposed dividend level at its 4 regularly scheduled meeting after the end of the third quarter. At 5 this level, I believe that our dividend payout will be at a more 6 normal ratio to earnings for a thrift. I also believe that we will 7 be able to sustain this level of dividend payout through the 8 current down cycle for the mortgage and housing markets, 9 which is presently forecasted to worsen before it gets better. 10 [Emphasis Added.]

12 30. On November 6, 2007, IndyMac reported its third quarter 2007 financial 13 results in a press release entitled "IndyMac Bancorp Reports Third Quarter Loss of 14 $202.7 Million ($2.77) Per Share" which stated in part: 15

16 IndyMac Bancorp, Inc. ("IndyMac(R)" or the "Company"), the

17 holding company for IndyMac Bank, F.S.B. ("IndyMac

18 Bank(R)"), today reported a net loss of $202. 7 million, or ($2.

19 77) per share, for the third quarter of 2007, compared with net

20 earnings of $86.2 million, or $1.19 per share, in the third quarter

21 of 2006. 22

23 Third Quarter Results Reflect Continued Unprecedented Market 24 Conditions 25

26 "We are clearly disappointed with this quarter's results, which

27 were driven by deteriorating mortgage delinquencies and a 28 declining housing market combined with an unprecedented

-18- 1 collapse in the secondary market for non-GSE loans and 2 securities ... IndyMac's primary business," stated Michael W. 3 Perry, Chairman and CEO. "While this loss is substantially 4 higher than we had been forecasting, it was clearly not 5 unexpected given the magnitude of the losses being reported by 6 others in our industry and the recent decline in our stock price. 7 No one in the mortgage industry came away unscathed in the 8 quarter, and we took $575 million, or $4.79 per share, in 9 combined credit costs and spread widening charges. This led to 10 only our second quarterly loss in the past 15 years since the 11 current management team began running IndyMac (the first loss 12 was in Q4-98 during the global liquidity crisis ). However, as I 13 said last quarter, safety and soundness is our highest priority 14 during these challenging times, and, in this respect, wefinished 15 the quarter in a very strong overallfinancialposition. 16

17 "IndyMac has not repurchased any shares since 2002, and, in 18 fact, we have prudently raised $644 million of equity capital in 19 2007 alone, enabling us to finish the quarter with Tier 1 core 20 and total risk-based capital ratios of 7.48 percent and 11.79 21 percent, respectively, a significant cushion of$823 million and 22 $361 million above the `well-capitalized' regulatory levels of 23 5.00 percent and 10.00 percent as of September 30, 2007 and 24 higher than our capital levels at December 31, 2006. 25

26 "We prudently increased our total credit reserves by $441 27 million , or 47 percent, to $1.39 billion in the third quarter. 28 These reserves now equal 56 percent of IndyMac Bank's $2.48

-19- fr -`^

1 billion in total capital, up from 38 percent at the end of last 2 quarter. Actual charge-offs taken during the quarter totaled 3 $146 million, such that the Company's total reserves equate to 4 9.5 times current quarterly charge-offs. Excluding non- 5 investment grade and residual securities, total Q3-07 charge- 6 offs were $55 million, and the total related credit reserve at 7 September 30 was $553 million, or 10 times the charge-off 8 amount. It should also be noted that 74 percent of current period 9 credit costs related to credit losses anticipated in future periods. 10

11 Looking Ahead 12 "While it is clearly disappointing that our stock is down 72 13 percent this year. . . and all of us at IndyMac have been 14 impacted by this along with our shareholders ... we are not 15 down and out, and our company remains intact, where many 16 others have failed," continued Mr. Perry. "We have learned 17 some tough lessons, taken some significant steps to address the 18 radically changed environment, and we are executing on an 19 action plan that continues to focus on safety and soundness, 20 maintaining strong liquidity, preserving our capital, 21 implementing our new production model and emphasizing a 22 return to profitability. Nonetheless, it remains extremely 23 difficult to provide an earnings forecast for the fourth quarter 24 and into 2008 given continued uncertainties about the length 25 and depth of the downturn in the housing and mortgage markets 26 and the abrupt and significant change we have made in our 27 production model in becoming a GSE lender. However, we do 28 believe we will see significant improvement in the fourth

-20- 1 quarter in credit costs and losses from spread widening, 2 given the large reserves we established this quarter and 3 because the new loans we are now originating are 4 predominantly those eligible for sale to the GSEs, whereas the 5 vast majority ofthe loans causing the Q3- 07 losses are in loan 6 types that have been cutfrom our guidelines. In addition, we are 7 rapidly making the transition from being primarily an Alt-A 8 lender to being a GSE lender, and we are seeing our mortgage 9 production volumes pick up. While our October rate locks of $8 10 billion are down 12 percent from the monthly average for Q4-06, 11 they are up 51 percent from September. Excluding conduit rate 12 locks, which business has now been discontinued, October's rate 13 locks are up 40 percent over the monthly average for Q4-06. Our 14 mortgage production growth has been achieved despite the fact 15 that roughly two-thirds of our Q I-07 production has been 16 eliminated through guideline cuts, which have been made based 17 on both credit and secondary market liquidity issues . With our 18 pipeline back up to $9.8 billion as of October 31 from a low of 19 $7.4 billion in September, I expect that our new, more GSE- 20 oriented mortgage production business will be profitable in Q4- 21 07, excluding credit costs from discontinued products and start- 22 up costs from our retail lending initiative. We expect that retail 23 lending will be profitable in Q1-08. 24 25 "As I look ahead to Q4-07 and 2008, given current industry 26 conditions, a continued elevated level of credit costs from 27 discontinued products and uncertain loan volumes and margins 28 under our new production model, IndyMac could be modestly

-21- 1 profitable, or we could struggle and have additional losses, 2 although we believe any quarterly losses would likely be 3 substantially lower than the Q3-07 loss. In that respect, we 4 believe that with our stock price at its current level relative to our 5 September 30 book value of $24.31 per share, the market expects 6 a bigger erosion in our book value than we believe is realistic at 7 this time. The bottom line is that we have strong capital, reserves 8 and liquidity to see us through this industry downturn. I can 9 assure all of our stakeholders that we will be working 10 tirelessly to safely restore IndyMac to its past levels of 11 performance, and we remain confident that our long term 12 returns on capital will be at or above 15 percent once this 13 current down cycle ends." 14 (Footnote omitted.) 15 [Emphasis Added.]

16 31. This was part of a series of partial disclosures and revelations

17 concerning the truth about IndyMac's business operations, finances, business

18 metrics, and future business and financial prospects. Nonetheless, IndyMac's

19 stock continued to trade at artificially inflated levels as this revelation, like others

20 made during the remainder of the Class Period, was accompanied by denials,

21 continued misrepresentations and baseless reassurances by defendants. Upon this

22 partial disclosure, IndyMac's stock dropped $1.69 per share on November 7, 23 2007, to close at $11.08 per share, a two-day decline of 13% on high trading 24 volume. 25 32. Thereafter, in the next couple of months, as more of the truth about 26 IndyMac's financials and business outlook emerged, more of the artificial 27 inflation in the Company's stock was revealed and the Company's stock price 28 dropped further.

-22- n

1 33. On December 5, 2007, IndyMac issued a response to a shareholder's 2 suggestion on the Company's blog. The next day, IndyMac filed a Form 8-K, 3 providing a copy of the shareholder's suggestion and defendant Perry's response, 4 which stated in part:

6 Shareholder' s Suggestion: 7 The previous suggestion addressed the purchase of IndyMac

8 stock by IndyMac insiders. The current suggestion states that

9 "the repurchasing of shares [by IndyMac] at these deflated 10 prices would send an even stronger message, not just about

11 the viability of IMB, but about how it feels about itself as a

12 sound investment. Later, as footing is regained and profit

13 realized, the raising of more capital from additional offerings can

14 resume."

16 Mike Perry' s Response: 17 Thank you for your suggestion. In normal times, your 18 suggestion (repurchasing shares with our capital cushion) .. . 19 would be exactly the right thing to do, given how far below 20 book value our shares presently trade.

22 These are not normal times. I attended the annual National 23 Housing Forum (hosted by the Office of Thrift Supervision) on 24 Monday of this week in Washington DC. Clearly, the housing 25 and mortgage markets are very tough right now, and no one is 26 able to forecast when things will get better. One of the speakers 27 said, "this current housing and mortgage market is a once in 100 28 year event".

-23- 2 Indymac Bank's business model is in the eye of this storm. Our 3 business is solely focused on financing USA homes, and we sell 4 most of our loans into the secondary market (and not only is the 5 private secondary market virtually closed . . . now the GSEs 6 have their own issues and are raising rates and cutting product 7 guidelines). Given this and declining home sales andprices and 8 rising delinquencies andforeclosures, we suffered a loss in the 9 3rd quarter and will suffer a loss in the 4th quarter (likely a 10 significantly reduced one in relation to Q307). At present, 11 while I do expect to continue to narrow our loss each quarter . . 12 . it is difficult to predict when we will return to profitability. 13 Hopefully, if all goes well, we can return to modestprofitability 14 sometime in the 2nd half of2008. 15

16 In this environment (until we can "see some light at the end of 17 the tunnel"), maintaining strong capital and liquidity levels is 18 paramount. So, unfortunately, not only are we not in a position 19 to repurchase shares ... even though we have a strong capital 20 cushion today (e.g., we raised $68.8 million in common equity 21 in October at an average price of $19.40 pper share) ... we are 22 looking to raise additional capital right now. As we have said 23 previously, we are considering a variety of capital raising 24 alternatives, including potentially raising capital through some 25 sort of convertible debt or preferred offering that is privately 26 placed with one or more investors . . . although we are 27 exploring every option possible to raise our capital levels, 28 including shrinking our balance sheet and cutting our common

-24- 1 stock dividend. With the above said, there is no guarantee in

2 this market that we can get anything done on acceptable terms. 3

4 I know it is counterintuitive, but in this present environment ... 5 the best way to preserve (and eventually grow) shareholder 6 value is to maintain strong capital levels and liquidity ... even if 7 that results in some short-term dilution. 8 Mike 9 P.S. Even after a 4th quarter loss, we expect our capital and 10 liquidity levels at 12/31/07 to be strong and roughly the same 11 as at 9/30/07. 12 [Emphasis Added.] 13

14 34. On February 12, 2008, IndyMac reported its fourth quarter 2007 15 financial results in a release which stated in part: 16

17 IndyMac Bancorp, Inc. ("IndyMac(R)" or the "Company"), the

18 holding company for IndyMac Bank, F.S.B. ("IndyMac

19 Bank(R)"), today reported a net loss of $509.1 million, or

20 ($6.43) per share, for the fourth quarter of 2007, compared

21 with net earnings of$72.2 million, or $0.97 per share, in the

22 fourth quarter of 2006. For the full year, IndyMac reported a 23 net loss of$614.8 million, or ($8.28) per share, IndyMac'sfirst

24 annual loss in its 23- year history, compared with net earnings

25 of $342.9 million, or $4.82 per share, in 2006. 26

27 "Consistent with nearly every other large financial institution in

28 the mortgage lending and securitization business, as a result of

-25- I the rapidly deteriorating housing and mortgage markets, we 2 took major write-downs and established significant credit 3 reserves and recognized a significant loss in the fourth quarter," 4 stated Michael W. Perry, IndyMac's Chairman and CEO. "We 5 absorbed $863 million in total pretax credit provisions/costs 6 during the quarter, and this led to our quarterly loss of $509 7 million. These credit provisions/costs allowed us to build our 8 total credit reserves for future losses by 71 percent during the 9 quarter to $2.4 billion at December 31, 2007, a four-fold 10 increase from $619 million at December 31, 2006. Actual 11 charge-offs taken during the quarter totaled $179 million, such 12 that the Company's total reserves equate to 13.3 times current 13 quarterly charge-offs. Excluding non-investment grade and 14 residual securities, total Q4-07 charge-offs were $99 million, 15 and the total related credit reserve at December 31 was $1.1 16 billion, or 11.3 times the charge-off amount in the fourth quarter 17 of 2007. While we do expect our charge-offs to increase 18 substantially in 2008 over 2007, we believe that the credit 19 reserves we have now built up are sufficient to absorb these 20 charge-offs such that we are currently forecasting that our 21 total credit provisions/costs in 2008 will be roughly $372 22 million, down from $1.45 billion in 2007, which we believe 23 will have a significant positive impact on our drive to return 24 IndyMac to profitability in 2008. 25

26 "As I said during 2007," continued Mr. Perry, "safety and 27 soundness remains our highest priority during these challenging 28 times, and, notwithstanding our fourth quarter loss, we finished

-26- 1 the quarter in a solid overall financial position . Our capital 2 levels continue to exceed the levels defined as 'well 3 capitalized ' by our regulators by virtue of the fact that 4 IndyMac has not repurchased any shares since 2002, and we 5 prudently raised $676 million of equity capital in 2007 - $500 6 million of bank perpetual preferred stock with an 8.5 percent 7 coupon in the second quarter, $146 of common equity (at an 8 average price of $20 per share in the third and fourth quarters) 9 and $30 million in holding company trust preferred. As a result, 10 at December 31, 2007 IndyMac Bank's core capital ratio was 11 6.24 percent and our total risk-based capital ratio was 10.50 12 percent, above the `well-capitalized' regulatory levels of 5.00 13 percent and 10.00 percent, respectively. We also continued to 14 maintain our total operating liquidity in excess of $6 billion at 15 the end of the fourth quarter, close to our all-time high level. 16 Our strong liquidity is enabled by the fact that virtually all of 17 IndyMac's business is conducted and assets are held within 18 IndyMac Bank. As a result, we are 100 percent funded with 19 deposits (approximately 95 percent of our deposits are fully 20 insured by the FDIC), FHLB advances, long-term debt and 21 equity, and we have no market funding sources (no commercial 22 paper or reverse repurchase borrowings). 23 (Footnote omitted.) 24 [Emphasis Added.)

26 35. After issuing its fourth quarter 2007 results, IndyMac sent a letter to its 27 shareholders summarizing 2007, which stated in part: 2811

-27- 11 1 2007 in Review

2 As a Federal thrift and major USA home lender, with a sector-

3 specific business model entering this crisis period that was

4 focused primarily on non-GSE mortgage banking (Alt-A

5 lending, securitization and servicing) and home construction

6 lending, IndyMac bore the brunt of the crisis as it worsened

7 throughout the year. The magnitude and rapidity of the

8 deterioration of the housing and mortgage markets was

9 disturbing and shocking to almost everyone, including

10 IndyMac, other financial institutions and our government. As

11 objective evidence of this decline's severity, our non-

12 performing assets (NPAs), which were only $184 million (or

13 0.63 % of assets) at December 31, 2006 increased eightfold to

14 $1.51 billion (or 4.61 % ofassets) at December 31, 2007 and are

15 projected to peak at between 7.5% and 8.0% of assets in the 16 second halfof2008.

18 Impact of the Credit Crisis on IndyMac 19 As a result of this increase in NPAs, combined with a decline in 20 delinquency "cure rates" and an increase in expected loss 21 severities on the disposition of non-performing loans and REO 22 due to the declining housing market and economy, IndyMac, 23 like many financial institutions, took a major step in bolstering 24 its credit reserves in the 3rd quarter, taking credit 25 provisions/costs of $408 million pre-tax, roughly four-fold 26 higher than the 2nd quarter, and increasing our credit reserves 27 47% in just one quarter to $1.39 billion.

-28- I As credit trends continued to deteriorate in the 4th quarter, we 2 undertook another review of all of our loan portfolios, including 3 our delinquency roll-rates and loss severities ... even hiring a 4 nationally recognized consulting firm to independently review 5 our subdivision and consumer construction portfolios. It is 6 somewhat of an oversimplification, but essentially, for our 7 consumer loan portfolios, we took the last four months of 2007 8 delinquency roll rates (which were horrible) and assumed these 9 rates would continue through Q3-08 and then gradually drop to 10 70% of these rates by the end of 2009. Additionally, our 11 forecast models factored in an additional 8-10% house price 12 depreciation from today's levels, consistent with the 13 Moody'sEconomy.com forecast. As a result, we more than 14 doubled our credit provisions/costs again in the 4th quarter to 15 $863 million, increasing our total credit reserves an additional 16 71 %from the 3rd quarter to $2.4 billion at December 31, 2007 17 (with $1.1 billion related to loans and REO and the other $1.3 18 billion consisting of gross credit reserves imbedded in non- 19 investment grade and residual securities). For the full year of 20 2007, we took $1.45 billion in pre-tax credit provisions/costs, 21 by far larger than IndyMac has taken in its entire history. 22 Importantly, of this $1.45 billion, only $483 million represented 23 losses actually realized in 2007, consisting of $200 million in 24 loan charge-offs, $46 million in REO write-downs and $237 25 million of realized credit losses on non-investment grade and 26 residual securities. In other words, $970 million pre-tax (or 27 $591 million after-tax) of IndyMac's credit provisions/ costs in 28

-29- 1 2007 are related to losses that were not realized in 2007, but 2 which we project to realize in 2008, 2009 and beyond. 3

4 Based on the establishment of these unprecedented credit 5 reserves and, to a lesser extent, on the collapse of our non- 6 GSE mortgage banking business, IndyMac lost $609 million 7 for the year, thefirst annual loss in our 23year history. As a 8 result ofthis loss andpanic market conditionsfor anything or 9 anyone involved in mortgages, IndyMac lost $2.8 billion, or 10 85%, ofits market capitalization in 2007. The only good news 11 is that, even with this significant loss, we remain in a 12 fundamentally soundfinancial position as a result ofraising 13 $676 million in equity capital in 2007: $500 million of bank 14 perpetual preferred stock with an 8.5% coupon in the 2nd 15 quarter, $146 million of common equity (at an average price 16 of $20 per share in the 3rd and 4th quarters) and $30 million 17 of Subsequent to the February 12, 2008 press release, 18 IndyMac holding company trust preferred securities. Our 19 capital levels continue to exceed the levels defined as "well 20 capitalized" by our regulators. At year end, IndyMac's core 21 capital ratio was 6.24%, and our total risk-based capital ratio 22 was 10.50 %, down from 7.39 % and 11.72 % at December 31, 23 2006. In addition to maintaining strong capital, IndyMac now 24 has $2.4 billion in credit reserves, or four times the $619 25 million it had at December 31, 2006, which puts us in a strong 26 position to return to profitability sooner than later. Indeed, 27 based on our new business model (which I discuss more 28 thoroughly below), we are forecasting a small profit in 2008,

-30- 1 even including the Q1-08 staff reduction and office closing 2 costs, and we believe we can maintain our "well-capitalized" 3 capital ratios even under worsening industry conditions. 4

6 Looking Ahead 7 The first part of our 2008 plan is to continue with the 8 conversion of our production model to the current realities of a 9 tough housing market and the absence of a non-GSE secondary 10 market and demonstrate that IndyMac can be profitable with 11 this production model. Second, we plan to achieve a $1.1 billion 12 reduction in our credit provisions/costs from 2007, which would 13 be the most significant factor contributing to our return to 14 profitability in 2008. Third, our goal is to reduce our operating 15 expenses, excluding REO costs, year-over-year by 29% starting 16 in Q2-08. Finally, we are committed to remaining a safe and 17 sound financial institution with strong levels of capital and 18 liquidity. With that said, we want to try and avoid raising 19 capital externally right now given our current stock price 20 relative to book value per share, as any capital raised would be 21 highly dilutive to existing shareholders (and we don't have 22 either the diversified business model or the "name brand" of 23 major financial institutions who are raising capital from foreign 24 government funds and others). As a result, we have to manage 25 our balance sheet very carefully during this period.

27 Let's look at each element of our 2008 plan in greater detail.

-31 - 1 * * 2 Credit Costs 3 The next part of our plan to return to profitability is to greatly 4 reduce our credit provisions/costs in 2008 and beyond. Based 5 on our $2.4 billion of credit reserves at December 31, 2007, we 6 expect to reduce our credit costs in 2008 substantially. Even 7 assuming a significant worsening of our non-performing assets, 8 we project our credit provisions/costs in 2008 to be roughly 9 $372 million, down roughly $1.1 billion from the $1.45 billion 10 we took in 2007. This is the key driver of our expected return to 11 profitability in 2008, but it is important to point out that even 12 $372 million would be our second highest year ever in credit 13 provisions/costs and would be a much higher credit cost figure 14 than our new, predominantly FH/NA, GSE and prime jumbo 15 home lending model warrants. In other words, as these high 16 credit provisions/costs are expected to abate in 2009 or so, we 17 believe our underlying new business model's profitability will 18 be significantly higher than in 2008 ... in the 13% to 15% ROE 19 range long term. 20 * *

21 Capital 22 The nextpart ofour plan is to continue to maintain our status 23 as a fundamentally safe and soundfinancial institution, and

24 the key to that is staying well-capitalized (above 5% core and 25 10% total risk-based capital). Our capital levels clearly have 26 declined as a result of the losses we have taken in establishing 27 significant reserves for future credit losses, but we still have a 28 solid cushion above the well-capitalized levels. Since we want

-32- 1 to try to avoid diluting our existing shareholders by issuing new 2 stock at a price well below book value per share, the key way 3 for us to "raise" additional capital and increase our capital 4 cushion is to suspend the dividend and shrink our balance sheet. 5 By suspending our annual dividend of $1 per share, or roughly 6 $81 million per year, and shrinking our balance sheet by 7 roughly $4.6 billion, or 14%, from December 31, 2007 via the 8 production cuts discussed above, some modest AAA MBS 9 sales, increasing the speed at which we sell loans to the GSEs 10 and normal portfolio runoff, we project that we can "raise" / 11 "free up" roughly $400 million of additional capital (an amount 12 that is substantial in relation to the current market value of the 13 entire company today), and we believe we can accomplish this 14 without "fire-selling" either the entire company or our reverse 15 mortgage business, which should be a tremendous long-term 16 asset for our shareholders. Based on these strategies and 17 assuming our current financial projections for 2008, we expect 18 our capital ratios to grow to over 7.25% core and 12.00% total 19 risk based by year-end.

20 (Footnote omitted.)

21 [Emphasis Added.] 22

23 36. Upon this news, shares in the Company's stock dropped from a high of 24 $8.30 per share on February 11, 2008 to as low as $6.80 per share - a decline of 25 $1.50 per share or 18% on high trading volume - before closing up at $8.24 per share 26 on February 12, 2008, based upon defendants' positive forecast of being able to 27 return to profitability in the second half of 2008. 28 37. On March 11, 2008, IndyMac filed a Form 8-K with the SEC that

-33- contained a release entitled "IndyMac Bancorp, Inc. Statement Dated March 11,^ 21 2008 on the Impact of the Current State of the Capital Markets to the Company's 3 First Quarter 2008 Forecast," which stated in part: 4

5 As has been widely publicized, the capital markets in recent 6 days have taken another turn for the worse with credit spreads 7 widening significantly due to panic market conditions caused by 8 uncertainty in the U.S. housing and mortgage markets, renewed 9 margin calls by Wall Street repo lenders on mortgage REITs 10 and hedge funds, and other economic and financial 11 uncertainties. Spreads on everything from relatively risk-free 12 instruments such as Fed Funds to LIBOR and U.S. Treasuries to 13 Fannie Mae and Freddie Mac mortgage-backed securities 14 ("MBS") have widened substantially to at or near all-time 15 historic levels. Spreads between Treasuries and other 16 instruments, in particular, non-GSE mortgage assets, are 17 difficult to ascertain, given the fact that there are virtually no 18 new non-GSE mortgage securities issuances and the only resale 19 activity is a handful of distressed sales. As a result, the financial 20 impact of this spread widening on IndyMac is difficult to 21 estimate at this time, but it is expected to have a negative effect 22 on the value of IMB's MBS portfolio, and therefore on the first 23 quarter 2008 forecast presented to shareholders on February 12, 24 2008. We believe that most ofany potential negative financial 25 impact in the first quarter of 2008 is not warranted by the 26 present underlyingperformance andlor ratings ofthese assets 27 and therefore any unrealized losses will likely reverse and have 28 a positivefinancial impact in subsequent quarters, either when

-34- 1 spreads tighten or over time via an increased assetyield. As of 2 December 31, 2007, approximately 83% of IndyMac's MBS 3 portfolio is classified as `Available for Sale'. This means that 4 any potential unrealized write-down on this portion of the 5 portfolio will flow through the `Other Comprehensive Income' 6 component of equity and will not affect either earnings or 7 regulatory capital. As of December 31, 2007, approximately 8 17% of the MBS portfolio is classified as 'Trading' and any 9 potential unrealized write-down on this portion of the portfolio 10 will directly affect earnings and capital. None of IndyMac's 11 AAA non-agency (Alt-a prime jumbo) MBS (over 86% of our 12 total MBS portfolio) has been downgraded, and the 13 performance of these securities has been reviewed several times 14 in the past year by the major rating agencies . Lastly, IndyMac 15 has the intent and ability to continue to hold these assets to 16 recovery as a result of funding its balance sheet with deposits, 17 FHLB advances, long-term debt and equity.

18 19 [Emphasis Added.] 20

21 38. On April 30, 2008, defendant Perry sent an internal e-mail to 22 Company's employees reporting that defendant Keys had requested and was grans 23 a medical leave of absence effective April 25, 2008. The e-mail further provided 24 update on estimated first quarter financial results. A copy of the e-mail was 25 eventually posted on the Company's blog. Additionally, IndyMac provided a copy 26 of the e-mail in a Form 8-K filed with the SEC on May 1, 2008. The e-mail provided 27 in part:

-35- 1 Update on the Ist Quarter 2 Given the decline in our stock price, some people have 3 questioned IndyMac's survivability in the current environment. 4 I am here to tell you that I believe we have turned a corner 5 and that our business is improving:

7 1. Our loss for Q108 will decline by roughly 50% to 65% 8 from Q407 , and roughly 25% of this loss is coming from one- 9 time severance and office closing costs. 10 2. Our credit costs in Q108 will be down roughly fourfold 11 from the $863 million we had in Q407. ]2 3. Our operating liquidity remains strong at roughly $4 13 billion, about the same as a year ago, but our liquidity needs are 14 significantly lower now than last year, as last year we had 15 roughly three times the mortgage production as we currently 16 have and our current production is far more liquid. 17 4. We raised over $670 million in new capital in 2007, in 18 advance of the current crisis and the major capital raises 19 recently completed by other financial institutions impacted by 20 the crisis, and we continue raising capital every day through our 21 Direct Stock Purchase Plan (DSPP). Since recommencing the 22 DSPP on February 26, we have raised $84 million in new 23 capital through today, including $45 million in the first month 24 of Q208 alone. 25 5. While mortgage production is a struggle in the current 26 environment, we continue to successfully convert our 27 production to a GSE/FHA/VA model , and we produced nearly 28 $10 billion in new mortgage loans in Q108 with greatly

-36- I improved credit quality and with 85% to 90% now being 2 saleable to the GSEs/FHA/VA. We are now achieving 3 profitability with this new production model, with all of our 9 4 regional wholesale centers and 104 of our 152 retail lending 5 branches being profitable in March. 6 6. Our forecasts show continued declines in credit costs and 7 in our overall losses each quarter for the remainder of the year. 8 [Emphasis Added.] 9

10 39. On May 12, 2008, IndyMac announced its first quarter 2008 financial 11 results in a press release which stated in part: 12

13 IndyMac Bancorp, Inc. ("Indymac® or the "Company"), the 14 holding company for IndyMac Bank, F.S.B. ("Indymac 15 Bank®"), today reported a net loss of$184.2 million, or ($2.27) 16 per share, for the first quarter of 2008, compared with net 17 earnings of$52.4 million, or $0.70per share, in thefirst quarter 18 of2007. 19 * * x^

20 "While many others in the mortgage finance industry saw 21 worsening losses during the first quarter given the current state 22 of the housing and credit markets, we achieved a 64 percent 23 reduction in our net loss from last quarter as we took the 24 appropriate steps in the second half of last year to get the bulk 25 of our credit costs behind us," stated Michael W. Perry, 26 Indymac's Chairman and CEO. "Last quarter, we took major 27 write-downs and established significant credit reserves in the 28 fourth quarter of 2007, absorbing $863 million in total pre-tax

-37- 1 credit provisions/costs during that quarter and building our total 2 credit reserves for future losses by 71 percent during the quarter 3 to $2.4 billion at December 31, 2007, a four fold increase from 4 $619 million at December 31, 2006. With those reserves in 5 place, we were able to reduce our total credit provisions/costs to 6 S249 million in the first quarter of 2008, a 71 percent reduction 7 from last quarter, allowing us to reduce our overall net loss this 8 quarter. It is important to also understand that 24 percent of our 9 first quarter loss is from staff reduction severance and office 10 closing costs, and another 22 percent is from business activities 11 that we have permanently closed and where losses are expected 12 to diminish over time, such as homebuilder construction 13 lending, home equity lending and our conduit channel." 14

15 "We also continued to build our total credit reserves to $2.7 16 billion, a 13 percent increase over last quarter and more than a 17 three-fold increase over $813 million in Q1-07. Actual realized 18 credit losses during the first quarter totaled $334 million, such 19 that the Company's total reserves at March 31, 2008 equate to 20 8.0 times current quarterly realized credit losses. Excluding 21 non-investment grade and residual securities, total Q1-08 realized 22 credit losses were $178 million, and the total related credit reserve 23 at March 31 was $1.3 billion, or 7.2 times the realized credit losses 24 in the first quarter.

26 "As I have been saying for the past year," continued Mr. Perry, 27 "safety and soundness remains our highest priority during these 28 challenging times, and we finished the first quarter again in a

-38- 001%, r^

1 solid overall financial position. Our capital levels continue to 2 exceed the levels defined as ' well capitalized' by our regulators. To 3 supplement the $676 million of equity capital we prudently raised 4 in 2007, we recommended raising equity capital through our Direct 5 Stock Purchase Plan (DSPP) on February 26, 2008 and raised $39 6 million in new equity through March 31, 2008. We are continuing 7 to raise capital nearly every business day through the DSPP and 8 have raised $97 million through this program year to date 9 through May 9. At March 31, 2008, Indymac Bank's Tier 1 10 `core' capital ratio was 5.74 percent, our Tier 1 risk-based ratio 11 was 9.00 percent, and our total risk-based capital ratio was 10.26 12 percent, above the `well-capitalized' regulatory levels of 5.00 13 percent, 6.00 percent and 10.00 percent, respectively.

15 "With respect to profitability, we do not expect that Indymac 16 will be able to return to overall profitability until the current 17 decline in home prices decelerates. As it is uncertain that this 18 will happen in 2008, we are not currentlyforecasting a return to 19 profitability this year."

21 "We do not at this time forecast a return to overall 22 profitability in 2008 given current market conditions, but we 23 do forecast significantly declining losses each quarter for the 24 balance of the year, as our restructuring charges abate, credit 25 provisions/costs and losses from discontinued operations 26 decline, and the profits from our new business model grow," 27 concluded Mr. Perry.

- 39 - 1 [Emphasis Added.]

3 40. On May 12, 2008, after releasing its first quarter 2008 results, IndyMac 4 held a conference call with investors and analysts to discuss the Company's first quarter 5 results: 6 [PERRY]: On the negative side, we do not expect IndyMac to 7 return to overall profitability realistically until these home 8 price declines start to decelerate. As it clearly is uncertain 9 when that will happen, we're not forecasting conservatively a 10 return to profitability in '08, but as I said, the losses will be 11 down substantially and manageable.

14 On the negative side, because we're one of the few pure 15 mortgage bankers out there, and because ofthe significant hits 16 we've taken, our capital ratios clearly have been depleted, and 17 you're limited to one times your regulatory core Tier 1 capital in 18 capitalized servicing, and we hit that cap a little bit in the fourth 19 quarter, and a lot more in the first quarter. The bottom line is as a 20 result, it's causing us to deduct $117 million, essentially if you're 21 over the one-time cap you have to deduct the servicing asset dollar 22 for dollar from all of your capital ratios. 23

24 The bottom line is we think that's a little perverse given the fact 25 that we have earned strong hedge returns for years, and that asset, 26 and it's our best performing asset. But it is what it is, and it's 27 affecting our capital in the first quarter. 28

-40- 1 Also, as a result of our loss, the servicing cap penalty and also we 2 have loan loss reserves, general loan loss reserves, that are only 3 allowed to be counted to capital equal to 1.25% of your total 4 assets and we have about double that amount. 5

6 So as a result of that, our total risk-based capital ratio was 7 relatively close to the well capitalized minimum. It was 10.26. 8 The ratio there is 10. Clearly, there are scenarios in this 9 environment where we could not be well capitalized and end up 10 being adequately capitalizedfor a short period oftime. 11

12 The last issue here, which is not a new issue, ever since we 13 became a thrift back in 2000, we've always informally agreed to 14 keep a higher capital ratio than the 5 and the 10, and we're 15 working our way back up to that. Right now our current plan 16 shows that we will get our capital ratios back up to 7 and 11 by 17 the end of the year. 18

20 The negative is that our nonperforming assets have continued 21 to rise, much like all thrifts. Non-performing single family 22 loans take a long time to work through your balance sheet. 23 They don't become nonperformers until 90 days and you often 24 can't foreclose on those properties for many months later, and 25 then we're selling as soon as we get possession of the property, 26 we're getting those REOs off our books within six months or 27 less. 28

-41- n ^.

1 But because of the cycle time that it takes to move through a 2 single-family non-performer, you can see that our non- 3 performers have grown to 6.51 % at March 31st, but that rate is 4 slowing. That rate of increase from the fourth quarter to the 5 first quarter was 39%, down from an 82% increase from the 6 third to the fourth, and we're projecting that MPA growth rate 7 to continue decline to 21 % in the second quarter to 6% in the 8 third, and basically be flat in the fourth and then decline from 9 there and I think we've been pretty accurate at forecasting those 10 NPAs.

11 [Emphasis Added.] 12

13 41. On this news, IndyMac's stock dropped from $3.43 per share on May 9, 14 2008 to a closing price of $2.32 per share on May 13, 2008, on extremely high 15 trading volume - a two-day decline of 32%, and an overall decline of 91% from 16 $24.55 per share on October 2, 2007. 17 42. Leading up to the May 12, 2008 disclosure and extending through the 18 Class Period, defendants made false statements and/or failed to disclose material 19 adverse facts known to them and concealed them from the investing public. 20 Specifically, defendants falsely reported or failed to disclose the following: 21 (a) The extent of the Company's exposure to anticipated losses and 22 defaults related to its homebuilder loans, Option ARM portfolio and other non- 23 performing assets than it had previously disclosed; 24 (b) IndyMac's capital base was inadequate considering the 25 Company's loss exposure and could jeopardize the Company's status as "well- 26 capitalized"; 27 (c) IndyMac set aside inadequate reserves for Option ARMs and its 28 other non-performing assets, thereby inflating the Company's earnings; and

- 42 1 (d) IndyMac falsely reported that its financial statements were 2 prepared in accordance with Generally Accepted Accounting Principles ("GAAP"); 3 and

4 (e) Given the extent of the Company's exposure to the increasingly 5 volatile credit and real estate markets and its capital base, the Company had no 6 reasonable basis to make projections about its earnings. As a result, the 'I Company' s earnings projections issued during the Class Period were, at a 8 minimum, reckless. 9 SCIENTER 10 43. As alleged herein, defendants acted with scienter in that defendants knew 11 that the public documents and statements issued or disseminated in the name of the 12 Company were materially false and misleading; knew that such statements or 13 documents would be issued or disseminated to the investing public; and knowingly and 14 substantially participated or acquiesced in the issuance or dissemination of such 15 statements or documents as primary violations of the federal securities laws. As 16 forth elsewhere herein in detail, defendants, by virtue of their receipt of informati 17 reflecting the true facts regarding IndyMac, their control over, and/or receipt and 18 modification of IndyMac's allegedly materially misleading misstatements and/or their 19 associations with the Company which made them privy to confidential proprietary 20 information concerning IndyMac, participated in the fraudulent scheme alleged herein. 21

22 PLAINTIFF'S CLASS ACTION ALLEGATIONS 23 44. Plaintiff bring this action as a class action pursuant to Federal Rule 24 Civil Procedure 23(a) and (b)(3) on behalf of a Class consisting of all those w 25 purchased IndyMac securities between August 16, 2007 and May 12, 2008, inclus: 26 and who were damaged thereby. Excluded from the Class are defendants, the offic 27 and directors of the Company, at all relevant times, members of their immedi 28 families and their legal representatives, heirs, successors or assigns and any entity i

-43- 1 which defendants have or had a controlling interest.

2 45. The members of the Class are so numerous that joinder of all members is 3 impracticable. Throughout the Class Period, IndyMac securities were actively traded 4 on the NYSE. While the exact number ofClass members is unknown to Plaintiff at this 5 time and can only be ascertained through appropriate discovery, Plaintiff believes that 6 there are hundreds or thousands ofmembers in the proposed Class. Record owners and 7 other members of the Class may be identified from records maintained by IndyMac or 8 its transfer agent and may be notified of the pendency of this action by mail, using the 9 form of notice similar to that customarily used in securities class actions. 10 46. Plaintiff's claims are typical of the claims of the members of the Class as 11 all members of the Class are similarly affected by defendants' wrongful conduct. 12 47. Plaintiff will fairly and adequately protect the interests of the members of 13 the Class and have retained counsel competent and experienced in class and securities 14 litigation.

15 48. Common questions of law and fact exist as to all members ofthe Class and 16 predominate over any questions solely affecting individual members of the Class. 17 Among the questions of law and fact common to the Class are: 18 (a) whether the federal securities laws were violated by defendants' acts 19 as alleged herein;

20 (b) whether statements made by defendants to the investing public 21 during the Class Period misrepresented material facts about the financial performance, 22 operations and management of IndyMac; and 23 (c) to what extent the members of the Class have sustained damages 24 and the proper measure of damages. 25 49. A class action is superior to all other available methods for the fair and 26 efficient adjudication of this controversy since joinder of all members is impracticable. 27 Furthermore, as the damages suffered by individual Class members may be relatively 28 small, the expense and burden of individual litigation make it impossible for members

-44- I-AAN

of the Class to individually redress the wrongs done to them. There will be 2 difficulty in the management of this action as a class action. 3 LOSS CAUSATION/ECONOMIC LOSS 4 50. By misrepresenting IndyMac's financial position, the defendants 5 presented a misleading picture of the Company's business and prospects. Thus, 6 instead of truthfully disclosing during the Class Period that IndyMac's business was 7 not as healthy or "well-capitalized" as represented, IndyMac falsely concealed the 8 extent of its exposure to its homebuilder loans , its Option ARMs and other non- 9 performing assets. 10 51. These claims of profitability caused and maintained the artificial 11 inflation in IndyMac's stock price throughout the Class Period and until the truth 12 about its future earnings was fully revealed to the market. 13 52. The truth about IndyMac's business operations, finances, business 14 metrics, and future business and financial prospects began to enter the market with a 15 series of partial disclosures and revelations beginning in November 2007, which 16 were accompanied by denials and continuing misrepresentations and assurances by 17 defendants. As a result, the artificial inflation in IndyMac's stock price did not 18 come out of the stock all at once, rather the artificial price inflation came out 19 piecemeal over time as the stock continued to trade at artificially inflated, albeit 20 lower, prices through May 2008. 21 53. Defendants' false and misleading statements and omissions had the 22 intended effect and caused IndyMac's stock to trade at inflated levels during the 23 Class Period. However, after the above revelations were fully disclosed to the 24 market, the Company's shares plummeted 91 % from their Class Period high before 25 these disclosures were made public.

27 APPLICABILITY OF PRESUMPTION OF RELIANCE FRAUD-ON-THE-MARKET DOCTRINE 28

-45- /ti

1 54. At all relevant times, the market for IndyMac common stock was 2 efficient market, for the following reasons, among others: 3 (a) IndyMac met the requirements for listing, and was listed 4 actively traded on the NYSE, a highly efficient and automated market; 5 (b) As a regulated issuer, IndyMac filed periodic public reports with 6 SEC; and 7 (c) Defendants regularly communicated with public investors vi 8 established market communication mechanisms, including through 9 disseminations ofpress releases on the national circuits ofmajor newswire services and to through other wide-ranging public disclosures, such as communications with the 11 financial press and other similar reporting services. 12 55. As a result of the foregoing, the market for IndyMac securities promptly 13 assimilated current information regarding IndyMac from all publicly available sources 14 and the assimilation of this information is reflected in the price of IndyMac securities. 15 Under these circumstances, all persons who purchased or acquired the securities of 16 IndyMac during the Class Period suffered similar injury through their purchase of the 17 aforementioned securities at artificially inflated prices and a presumption of reliance 18 applies. 19 NO SAFE HARBOR 20 56. The statutory safe harbor provided for forward-looking statements 21 certain circumstances does not apply to any ofthe allegedly false statements pleaded in 22 this complaint. Many of the specific statements pleaded herein were not identified as 23 "forward-looking statements" when made. To the extent there were any forward- 24 looking statements, there were no meaningful cautionary statements identifying 25 important factors that could cause actual results to differ materially from those in the 26 purportedly forward-looking statements. Alternatively, to the extent that the statutory 27 safe harbor does apply to any forward-looking statements pleaded herein, defendants 28 are liable for those false forward-looking statements because at the time each of those

-46- 1 forward-looking statements was made, the particular speaker knew that the particular 2 forward-looking statement was false, and/or the forward-looking statement was 31 authorized and/or approved by executive officer(s) of IndyMac who knew that those 4 statements were false when made.

6 FIRST CLAIM Violation of Section 10(b) of 7 The Exchange Act and Rule 10b-5 Promulgated Thereunder Against All Defendants 8 57. Plaintiff repeats and reallege each and every allegation contained above 9 if fully set forth herein. 10 58. During the Class Period, defendants carried out a plan, scheme and course 11 of conduct which was intended to and, throughout the Class Period, did: (i) deceive the 12 investing public, including Plaintiff and other Class members, as alleged herein; and (ii) 13 cause Plaintiff and other members of the Class to purchase IndyMac's securities at 14 artificially inflated prices and to suffer losses when the truth was revealed and the price 15 of the Company's stock dropped. In furtherance of this unlawful scheme, plan and 16 course of conduct, defendants took the actions set forth herein. 17 59. Defendants: (i) employed devices, schemes, and artifices to defraud; (ii 18 made untrue statements of material fact and/or omitted to state material facts necessary 19 to make the statements not misleading; and (iii) engaged in acts, practices, and a course 20 of business which operated as a fraud and deceit upon the purchasers ofthe Company's 21 securities in an effort to maintain artificially high market prices for IndyMac's 22 securities in violation of Section 10(b) of the Exchange Act and Rule I Ob-5. 23 60. All defendants are sued either as primary participants in the wrongful 24 illegal conduct charged herein or as controlling persons as alleged below. 25 61. Defendants, individually and in concert, directly and indirectly, by the use, 26 ' means or instrumentalities of interstate commerce and/or of the mails, engaged and 27 ^ participated in a continuous course of conduct to make false statements and/or conceal 28

-47- r

1 adverse material information about IndyMac's earnings and performance, as 2 herein. 3 62. Defendants employed devices, schemes and artifices to defraud, while i 4 possession of material adverse non-public information and engaged in acts, practices, 5 and a course of conduct as alleged herein in an effort to assure investors of IndyMac's 6I value and performance and continued substantial growth, which included the making 7 of, or the participation in the making of, untrue statements of material facts and 8 omitting to state material facts necessary in order to make the statements made about 9 IndyMac and its performance and future prospects in light of the circumstances under 10 which they were made, not misleading, as set forth more particularly herein, and 11 engaged in transactions, practices and a course of business which operated as a fraud 12 and deceit upon the purchasers of IndyMac's securities during the Class Period. 13 63. Each of the Individual Defendants' primary liability, and contro 14 person liability, arises from the following facts: (i) the Individual Defendants were 15 high-level executives and/or directors at the Company during the Class Period and 16 members of the Company's management team or had control thereof; (ii) each of the 17 Individual Defendants, by virtue of their responsibilities and activities as a senior 18 officer and/or director of the Company, was privy to and participated in the creation, 19 development and reporting ofthe Company's internal budgets, plans, projections and/or 20 reports; (iii) each ofthe Individual Defendants enjoyed significant personal contact and 21 familiarity with the other Individual Defendants and was advised of, and had access to, 22 other members ofthe Company's management team, internal reports and other data and 23 information about the Company's finances, operations, and sales at all relevant times; 24 and (iv) each of the Individual Defendants was aware of the Company's dissemination 25 of information to the investing public which they knew or recklessly disregarded was 26 materially false and misleading. 27 64. Defendants had actual knowledge ofthe misrepresentations and omissi 28 I of material facts set forth herein, or acted with reckless disregard for the truth in that

-48- 1 they failed to ascertain and to disclose such facts, even though such facts were available 2 to them. Defendants' material misrepresentations and/or omissions were done 3 knowingly or recklessly and for the purpose and effect of concealing IndyMac's 4 financial performance and risk profile from the investing public and supporting the 5 artificially inflated price of its securities. As demonstrated by defendants' 6 overstatements and misstatements of the Company's financial performance and 7 prospects throughout the Class Period, defendants, if they did not have actual 8 knowledge of the misrepresentations and omissions alleged, were reckless in failing toj 9 obtain such knowledge by deliberately refraining from taking those steps necessary tol 10 discover whether those statements were false or misleading. 11 65. As a result of the dissemination of the materially false and misleading 12 information and failure to disclose material facts, as set forth above, the market price) 13 of IndyMac's securities was artificially inflated during the Class Period. In 14 of the fact that market prices of IndyMac's securities were artificially inflated, and 15 relying directly or indirectly on the false and misleading statements made by 16 defendants, or upon the integrity of the market in which the securities trades, and/or in 17 the absence of material adverse information that was known to or recklessly 18 disregarded by defendants, but not disclosed in public statements by defendants during 19 the Class Period, Plaintiff and the other members of the Class acquired IndyMac's 20 securities during the Class Period at artificially high prices and were damaged thereby. 21 66. At the time of said misrepresentations and omissions, Plaintiff and other 22 members of the Class were ignorant of their falsity, and believed them to be true. Had 23 Plaintiff and the other members of the Class and the marketplace known the truth 24 regarding IndyMac's actual financial performance and risk profile, which was 25 disclosed by defendants, Plaintiff and other members of the Class would not I 26 purchased or otherwise acquired their IndyMac securities, or, if they had acquired such 27 securities during the Class Period, they would not have done so at the artificially 28 inflated prices which they paid.

-49- n

1 67. By virtue of the foregoing, defendants have violated Section 10(b) of the 2 Exchange Act and Rule I Ob-5 promulgated thereunder. 3 68. As a direct and proximate result of defendants' wrongful conduct, Plaintiff 4 and the other members of the Class suffered damages in connection with their 5 respective purchases and sales of the Company's securities during the Class Period. 6 SECOND CLAIM Violation of Section a) of 7 The Exchange Act Against the Individual Defendants 8 69. Plaintiff repeats and realleges each and every allegation contained above 9 as if fully set forth herein. 10 70. The Individual Defendants acted as controlling persons of IndyMac within 11 the meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their 12 high-level positions, and their ownership and contractual rights, participation in and/or 13 awareness of the Company's operations and/or intimate knowledge of the false 14 financial statements filed by the Company with the SEC and disseminated to the 15 investing public, the Individual Defendants had the power to influence and control, and 16 did influence and control, directly or indirectly, the decision-making of the Company, 17 including the content and dissemination of the various statements which Plaintiff 18 contends are false and misleading. 19 71. The Individual Defendants were provided with or had unlimited access to 20 copies of the Company's reports, press releases, public filings and other statements 21 alleged by Plaintiff to be misleading prior to and/or shortly after these statements were 22 issued and had the ability to prevent the issuance of the statements or cause the 23 statements to be corrected. 24 72. In particular, each of these defendants had direct and supervisory 25 involvement in the day-to-day operations of the Company and, therefore, is presumed 26 to have had the power to control or influence the particular transactions giving rise to 27 the securities violations as alleged herein, and exercised the same. 28 73. As set forth above, IndyMac and the Individual Defendants each violated

-50- 1 Section 10(b) and Rule 10b-5 by their acts and omissions as alleged in this Complaint. 2 By virtue oftheir positions as controlling persons, the Individual Defendants are liable 3 pursuant to Section 20(a) of the Exchange Act. As a direct and proximate result of 4 defendants ' wrongful conduct, Plaintiff and other members of the Class suffered 5 damages in connection with their purchases of the Company ' s securities during the 6 Class Period. 7 PRAYER FOR RELIEF 8 WHEREFORE, Plaintiff prays for judgment as follows: 9 A. Declaring this action to be a proper class action pursuant to 10 Fed.R.Civ.P. 23; 11 B. Awarding Plaintiff and the members of the Class compensatory 12 damages, including interest; 13 C. Awarding Plaintiff and other members of the Class prejudgment and 14 postjudgment interest, as well as reasonable attorneys' fees, expert witness fees, 15 and other costs and disbursements; and 16 D. Awarding Plaintiff and other members of the Class any other relief as 17 the Court may deem just and proper. 18

- 51 - 1

2 JURY TRIAL DEMANDED 3 Plaintiff hereby demands a trial by jury.

6 7 Dated: JuneI0 2008

8 5455 Wilshire Blvd. Suite 1800 9 Los Angeles CA 96036 Tel: 213/985-1274 10 Fax: 213/985-1278 [email protected] 11 David R. Scott 12 SCOTT + SCOTT LLP PO Box 192 13 108 Norwich Avenue Colchester CT 06415 14 Tel: 860/537-5537 Fax: 860/537-4432 15 drscott@scott -scott.com

16 Attorneys for Plaintiff

23 24

-52- PLAINTIFF CERTIFICATION PURSUANT TO FEDERAL SECURITIES LAWS

Ariel Investments Ltd., ("Plaintiff'), declares , as to the claims asserted under the federal securities laws, that:

I . Plaintiff has reviewed the Complaint and authorizes Scott + Scott, LLP and such co-counsel it deems appropriate to associate with to pursue this action on a contingent fee basis.

2. Plaintiff did not purchase the security that is the subject of this action at the direction of Plaintiff's counsel, or in order to participate in any private action or any other litigation under the federal securities laws.

3. Plaintiff is willing to serve as a representative party on behalf of a class, including providing testimony at deposition and trial, if necessary.

4. Plaintiffs transaction(s) in the INDYMAC BANCORP, INC. (IMB) security that is the subject of this action during the Class Period is/are as follows:

No of Shares Buy/Sell Date Price Per Share

10,000 Buy 11/19/2007 $9.4 5,000 Sell 02/28/2008 $6.43

5. During the three years prior to the date of this Certification, Plaintiff has never served, nor sought to serve, as a class representative in a federal securities fraud case.

6. Plaintiff will not accept any payment for serving as a representative party on behalf of the class beyond the Plaintiff's pro rata share of any recovery, except such reasonable costs and expenses (including lost wages) directly relating to the representation of the class as ordered or approved by the Court.

I declare under penalty of perjury under the laws of the United States that the foregoing is true and correct . Executed this 25 day of June, 2008 , at Tel Aviv Israel (city, state, country).

Your Printed Name: Gil Yalon

Signature on behalf of Ariel Investments, Ltd.:

Position: Managina Director/Co-Founder

Mailing Address: _P.O. Box 16488

Tel Aviv Isreal 62097

Telephone number: 972-54-7343252

E-mail address: yalonncorngene.cozn