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New Century creditors seek to investigate KPMG
July 17, 2007 / 8:43 PM / 10 years ago

New Century creditors seek to investigate KPMG

NEW YORK, July 17 (Reuters) - New Century Financial Corp. NEWCQ.PK creditors have asked a federal judge for permission to investigate KPMG LLP’s relationship with the bankrupt subprime mortgage lender, court records show.

In a Monday filing with the U.S. Bankruptcy Court in Wilmington, Delaware, New Century’s official committee of unsecured creditors said it wants to obtain documents from KPMG, and question current and former officers concerning its accounting, auditing and other services for New Century.

KPMG resigned as auditor on April 27, 25 days after New Century filed for Chapter 11 bankruptcy protection from creditors. The lender is now liquidating.

“It is not unusual for the work of an auditor to be reviewed in a bankruptcy case such as this,” KPMG spokesman Dan Ginsburg said. “We are confident that any objective review will confirm that our work was performed in accordance with professional standards.”

The creditors’ committee said it plans to coordinate its efforts with those of Michael Missal, a securities enforcement specialist investigating alleged misconduct at New Century as the company’s court-appointed examiner.

In addition, the committee said it plans to seek testimony from audit partner John Donovan and senior manager Mark Kim, court records show.

Missal, in a July 11 filing, also requested court approval to investigate KPMG. He said KPMG lawyers advised him that the auditor will not produce documents unless it receives a subpoena.

Irvine, California-based New Century was the largest independent provider of home loans to people with poor credit before collapsing amid mounting customer defaults.

New Century has said it overstated 2006 earnings and probably overstated 2005 earnings, but does not plan to restate any results because it is liquidating.

It has also said federal prosecutors in California are examining accounting errors and trading in its securities, and the U.S. Securities and Exchange Commission has opened a formal investigation into the company.

Ginsburg said KPMG’s last audit report of New Century’s annual financial statement was for the 2005 fiscal year. To view additional stories about the subprime lending crisis, click on [nN16195443]

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