U.S. thrift official from Sammamish demoted after IndyMac probe

The federal regulator who oversaw the seizure of IndyMac Federal Bank has been demoted after a government inquiry found he allowed the Pasadena, Calif.-based thrift to backdate a transaction to help it meet a regulatory standard.

Darrel Dochow, of Sammamish, was removed as director of the Western region for the Office of Thrift Supervision, agency head John Reich told the Treasury Department's office of the inspector general in a letter Sunday. He could not be reached for comment Monday night.

In a May 9 phone call, Dochow agreed to allow IndyMac to record $50 million received that day from its parent company as being obtained before March 31, the Treasury inspector general, Eric Thorson, wrote in a letter Monday to the Senate Finance Committee.

The move allowed IndyMac to tell the Federal Deposit Insurance Corp. (FDIC) it was "well capitalized" at the end of the first quarter, meaning it was financially strong enough to avoid being taken over by the agency.

As more problems with the company emerged, depositors began rapidly pulling their money out in July, forcing the FDIC to step in.

The agency has estimated IndyMac's failure will cost the federal deposit insurance fund $8.9 billion.

In his letter, Thorson suggested there was little or no justification for backdating the infusion of funds but said he was still investigating the case.

He said his office had discovered the Office of Thrift Supervision also had allowed other banks to backdate capital infusions.

Thorson's letter was released by U.S. Sen. Chuck Grassley of Iowa, the Finance Committee's ranking Republican.

For the backdating to be permissible, Thorson wrote, there would have to be documentation from before the end of the first quarter showing IndyMac's parent had intended to give the banking unit the money.

"However, in our work thus far, we have neither found nor been shown any indication that this intent existed," Thorson wrote.

Banking experts said IndyMac, at a minimum, should have disclosed the date change to investors and made its actions clear to the FDIC.

Without the date change, the thrift would have been forced to ask the FDIC for a waiver allowing it to take brokered bank deposits. That would have been a red flag both to the agency and to investors that the thrift was having problems, experts said.

"This seems bad on two levels," said James Barth, a former chief economist with the Office of Thrift Supervision. "Information like this should not be kept hidden. You want to protect investors and allow them to sell their shares if they want to get out, and you want to protect the FDIC so it can minimize its risk exposure by taking action sooner."