Legal News

KPMG sued over New Century audits

By Richard Binder

Legal firm Thomas, Alexander & Forrester LLP filed two suits today on behalf of a trustee of New Century Financial Corp. The suits allege that the company's auditor, KPMG LLP, assisted in and certified "materially misstated financial statements," and that KPMG's international parent is responsible for "the severely reckless and grossly negligent acts of its agent" that led to New Century's collapse two years ago.

New Century, an Irvine, CA., mortgage lender, had been one of the country's largest mortgage lenders to people with poor credit histories. But after it disclosed accounting errors in early 2007,  New Century's stock price plummeted 90%. Its outstanding repurchase requests soared to $8 billion and New Century soon collapsed as it was no longer able to finance its lending business.

The suit against KPMG LLP was filed in California and the suit against KPMG International was filed in New York.  The complaint in California asks for no less than $1 billion in compensatory and consequential damages.

Read the full story at WSJ.

Full post as published by Legal Pad | LA on April 01, 2009 (boomark / email).