New Century executives charged with civil fraud
Monday, December 7, 2009
The Securities & Echange Commission today filed civil fraud charges against three former top executives of the Irvine-based New Century Financial Corp., once one of the nation’s largest subprime lenders and an influential political operator.
In its complaint, the SEC alleges that New Century sought to calm investors by saying its business was not at risk and was performing better than its peers.
The suit says the New Century executives failed to disclose important negative information, including dramatic increases in early loan defaults, loan repurchases, and pending loan repurchase requests. The chief executive officer, Brad A. Morrice of Laguna Beach would detail the problems in regular internal reports, including weekly reports that Morrice ominously entitled “Storm Watch.”
In addition to naming Morrice in the suit, the SEC filed civil fraud charges against former Chief Financial Officer Patti M. Dodge of Irvine, and former Controller David N. Kenneally of Rossmoor, Calif. Here is the LA Times account of the development, and here is the New York Times account of the latest charges.
ProtectConsumerJustice.org focused in part on New Century in this special report detailing how the subprime industry and banks this decade blunted and gutted attempts to rein in their practices.
New Century collapsed in 2007–only three months after one of its senior vice presidents, Marc Lowenthal, appeared before the California Senate banking committee in Sacramento, urging lawmakers to refraid from taking any steps to limit the sorts of loans the company issued. A video clip of that appearance is at the top of this posting.
Robert Khuzami, the SEC’s Director of Enforcement said in a statement:
“New Century shareholders took a double-hit: the company’s mortgage assets and business performance became increasingly impaired, and management manipulated its numbers and concealed its deteriorating performance.”