The final report on the bankruptcy proceedings of New Century Financial Corporation, the mortgage company that collapsed in the first wave of the subprime crisis, was released today. The 8-month examination — conducted by Kirkpatrick & Lockhart Preston Gates Ellis D.C. partner Michael Missal — reveals troubling practices in management, loan originations, and accounting at the now-bankrupt company.
“In a nutshell it shows the embryo of the credit crisis and how easy it was for very risky mortgage loans to be originated and put into the financial system,” says Missal in an interview with The BLT.
Missal, who was also lead counsel to the examiner in the WorldCom bankruptcy, filed the 550-page report last month, and it was unsealed today by the U.S. Bankruptcy Court for the District of Delaware.
The report says that the debtors’ estates may have claims against New Century and its accounting firm KPMG, including claims against former New Century officers to recover past bonuses tied to inaccurate financial statements and against KPMG for professional negligence and misrepresentation. “These causes of action could seek millions of dollars in recoveries,” says the report.
“They had a breakdown of internal controls, which should have been in place to prevent these things from happening,” says Missal.
See this American Lawyer story for more detail on Missal's bankruptcy fees.
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