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Politics & Money

Game Over: New Century Won’t Be Bought

News broke late yesterday that New Century will shutter the rest of its business, laying off the remaining 2,000 employees it had been keeping in hopes of finding a buyer. Bloomberg reported yesterday that company officials finally conceded what I’d suspected all along — that nobody wanted to touch New Century, even with a 10-foot stick. It looks like the company will auction off its servicing business to the highest bidder, but its origination platform has become worthless, according to the story by Bloomberg:

New Century Financial Corp., the biggest subprime mortgage company to declare bankruptcy, will close its home-lending unit and fire about 2,000 employees after failing to find a buyer. Chief executive Brad Morrice informed employees of the failed search yesterday , said Dan Gagnier, a spokesman for the Irvine, Calif., firm. A court-administered auction continues for the company’s servicing business, which mails out monthly statements and handles collections, Gagnier said.

I also managed to find a new SEC filing from the defunct company regarding KPMG quitting as the company’s auditors. Not that the move by KPMG was surprising — I mean, what do you really have to audit when there isn’t a company? — but some of the details regarding possible accounting improprieties at the company stuck out to me. None of what was disclosed hasn’t already been out there before, but how many people are still paying attention to an acquisition the company made in 2005? Apparently, KPMG had some concerns way-back-when:

KPMG’s report on management’s assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting as of December 31, 2005, contains an explanatory paragraph that states that the Company acquired certain assets and assumed certain liabilities of RBC Mortgage Company during 2005, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2005, RBC Mortgage Company’s internal control over financial reporting associated with total assets of $1.2 billion and total revenues of $59.6 million included in the Company’s consolidated financial statements as of and for the year ended December 31, 2005. KPMG’s audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of RBC Mortgage Company.

Not that it matters much now, I suppose. BTW, you should read this post over at Calculated Risk on CEO Brad Morrice’s “quivering” delivery of the news to his employees.

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