Executives At Subprime Lender New Century Charged by SEC With Fraud

Fraud charges have been brought upon three former top executives of the New Century Financial Corporation for misleading investors as the collapse of the firm's subprime mortgage business was taking place.

"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," said Robert Khuzami, the SEC's Director of Enforcement.

The three persons charged in the investigation include former CEO and co-founder Brad A. Morrice, Former CFO Patti M. Dodge and former controller David N. Kenneally.

The SEC is alleging that New Century was misleading investors that business was not at risk and was in fact performing ahead of its peers, while failing to disclose important information to investors like dramatic increases in early loan defaults, loan repurchases, and pending loan repurchase requests.

Allegedly Morrice titled regular reports on the company's financial state, "Storm Watch," while not disclosing the negative information in the reports to investors.

Dodge and Kenneally are additionally being accused of fraudulently accounted for expenses related to bad loans set to be repurchased.

The complaint from the SEC further alleges that the executives being investigated caused investors "substantial losses," as the company's stock fell from highs of near $50 to less than a dollar when it filed for bankruptcy protection in April 2007.

Currently shares of New Century are valued at $4.22, down 4 percent on the day.

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