SEC to Settle with New Century Executives
The US SEC (Securities and Exchange Commission) has accepted the offer of New Century executives to settle complaints. The senior management of the New Century Financial Corp., the US sub-prime lender, approached the SEC with the offer. Patti Dodge, New Century’s former chief financial officer; David Kenneally, former controller and Brad Morrice, former chief executive officer and co-founder put forward their offer. The offer is presently waiting for approval in court.
The regulatory body had previously filed complaints alleging that the 2nd and 3rd quarters of 2006 saw the bank filing misleading and false statements regarding its mortgage sub-prime business.
The SEC also alleged that both Morrice and Dodge were aware that the lender’s loan portfolio showed particular negative trends but they took no correcting measure to fully disclose the issue.
SEC further alleged that Kenneally brought about changes in the bank’s loan repurchase obligation, which is again contradictory to the US GAAP for the 2nd and 3rd quarters of 2006.
SEC said in its statement that the whole fiasco led to an overstatement of New Century’s financial results and an understatement of the lender’s repurchase reserve.
Furthermore, Dodge was made aware of the changes but he failed to either fully disclose it or properly account for it.
The settlement offer by New Century meant that Morrice will have to agree to a permanent injunction, a disgorgement of $464,354 and a payment of a $250,000 civil penalty.
Dodge and Kenneally too have agreed to permanent injunction and they will be kept from violating securities law.
Dodge will have to come up with a disgorgement of $379,808 and a payment of a $100,000 civil penalty while Kenneally has agreed to a disgorgement of $126,676 and a payment of $32,500 in civil penalty.