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Corporate Officers in California Need to Be More Careful than Directors

Logo of Indymac Bank, whose corporate officers in California were not protected by the Business Judgment Rule

In California, the so-called Business Judgment Rule (“BJR“) protects corporate directors. They are not responsible for honest mistakes of business judgment. A recent case revealed that the BJR does not protect corporate officers in California.

During 2007, Indymac Bank bought more than $10 billion in risky residential loans. These loans ultimately generating losses of more than $600 million. Indymac closed. The Federal Deposit Insurance Corporation was appointed receiver.

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