LOS ANGELES (CN) – Three top officers of New Century Financial Corp. lied to investors to dump $142 million in stock on them as the subprime lender was collapsing in 2006, the SEC claims in Federal Court. Formerly one of the biggest subprime lenders in the nation, New Century’s stock price crashed from $50 to less than $1 and it filed for bankruptcy in April 2007.
The SEC sued former CEO and co-founder Brad A. Morrice of Laguna Beach, former CFO Patti M. Dodge of Irvine, and former Controller David N. Kenneally of Rossmoor, Calif.
It claims the company raised $142.5 million by selling stock to new investors in the second half of 2006.
When New Century announced in February 2007 that it would have to restate its 2006 “earnings,” the stock price fell by 36 percent, to $19, the SEC said in announcing its lawsuit.
It says New Century’s stock price “ranged from $30 to $50” in early 2006 to early 2007, and sank to less than $1 by April 2007.
The SEC wants Morrice and Dodge to repay their bonuses and “equity-based compensation” and it wants all three defendants ordered not to do such a thing again – ever.