In a verbal order entered on Monday and released as a transcript on Tuesday, U.S. District Judge Manuel Real gave an extensive explanation for siding with the defendants and rejecting many of the SEC's allegations in the case.

The lawsuit is one of dozens of cases the SEC has brought against executives at notable firms for conduct that allegedly fueled the financial crisis.

The underlying theme in the IndyMac case, as well as other cases, is that executives failed to adequately disclose risks as problems emerged in 2007 and 2008.

The SEC has sued former executives at mortgage finance agencies Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) on similar grounds, alleging that six former top officials approved misleading statements claiming the companies had minimal holdings of higher-risk mortgage loans, including subprime loans.

In the IndyMac case, the SEC in February 2011 sued the bank's former chief executive Michael Perry and former finance chief Scott Keys.

The SEC is accusing them of securities fraud and said they withheld negative forecasts and misled investors in 2008 about the bank's capital raising efforts as the bank's financial condition worsened.

But the disclosures were neither false nor misleading, Real said.

The SEC had alleged, for example, that the bank failed to disclose an internal forecast that showed the bank's capital ratio could fall below a 10 percent threshold required by regulators.

But firms were not required to disclose all internal projections, Real said.

The SEC also accused the executives of misleading investors about a stock purchase program and hiding the fact that it was being used to raise capital.

Real said IndyMac had disclosed the program in other parts of the 10-K filing at issue.

The SEC also alleged IndyMac made misleading statements about its liquidity, but the statements were true because they clearly only referred to 2007, Real said.

"Predictive statement are just what the name implies: Predictions. As such, any optimistic projections contained in such statements are necessarily contingent," Real said.

An SEC spokesman said the agency is reviewing the decision.

PRESSURE TO BRING CASES

Top administration officials have said much of the financial crisis was caused by greed and recklessness, not necessarily unlawful conduct.

Real's ruling appears to underscore such an argument.

"I think the SEC has felt extraordinary pressure to bring cases arising out of the financial crisis," said Gregory Bruch, a lawyer at Willkie Farr & Gallagher who represented Keys in the case. "I can't speak to the merits of any other case, but generally, that pressure has resulted in decisions they will regret in the long run."

To be sure, the ruling is just one within a larger case, and has no direct impact on other cases the SEC has brought.

"I think the fairest assessment (of the SEC's record) is that the record is mixed," said Andrew Vollmer, a former deputy general counsel at the SEC who is now a lawyer at Wilmer Cutler Pickering Hale and Dorr.

"The commission has brought some good cases, well-grounded cases, and I think they have brought some other cases where they have been criticized," he said.

The ruling does not end the SEC's case against Perry, since charges related to two additional securities filings are still scheduled for trial next month.

"We still have a trial, and I just view it as a narrowing of the evidence," said Donald Searles, a senior trial attorney in the Los Angeles regional office of the SEC who is litigating the case. "Each of the filings stands on their own."

NO DISGORGEMENT

Even minor details, according to the Monday ruling, the SEC got wrong.

Regulators had accused the executives of withholding information about deferring dividend payments, for example. But the bank disclosed the information within two business days of a board vote on the issue, Real said, which fell within the required window.

And he rejected the SEC's ability to get any disgorgement in the case, since both Perry and Keys sold no stock in the years at issue, received no bonus, and lost the value of their stock holdings when the company filed for bankruptcy, Real said.

The Federal Deposit Insurance Corp also sued Perry in a parallel case, and that litigation is still pending.

The SEC case is Securities and Exchange Commission v. Michael W. Perry and A. Scott Keys, U.S. District Court for the Central District of California, case No. 11-cv-01309.

(Reporting By Aruna Viswanatha; Editing by Tim Dobbyn)

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