Potential liabilities continue to mount for troubled subprime mortgage banker New Century Financial Corporation today, after announcing last week that it had failed to properly account for the impact of loan repurchases. Housing Wire has learned that at least seven law firms in four different states are currently seeking to gain class action status for claims of securities fraud against New Century, as a result of the company's pending income restatements and resulting stock tumble. The financial implications of any pending class action suit are as of yet unclear, as none of the existing classes have been certified by the respective courts in which the motions were filed. New Century's stock has fallen more than 45 percent after it admitted to what it called "material" problems in its financial reporting, trading at $17.26 as of HW's publishing deadline. The company's stock had closed at $30.13 on February 8th; New Century announced the pending restatements after market close on February 8.
The complaints, filed in numerous courts throughout the United States, charge New Century and certain of its officers and directors with violations of the Securities Exchange Act of 1934. The six complaints obtained by Housing Wire collectively charge that New Century issued "materially false and misleading" statements regarding the company's business and financial results and concealed "adverse facts" from the investing public, including a number of assertions centered on the company's failure to anticipate, react to, and account for deteriorating subprime collateral performance. The seven law firms filing charges include Connecticut-based Schatz Nobel Izard, P.C. and Scott+Scott, LLP; New York-based Abbey Spanier Rodd Abrams & Paradis, LLP; Pennsylvania-based Law Offices of Brodsky & Smith, LLC and The Law Firm of Goldman Scarlato & Karon, P.C.; and California-based Lerach Coughlin Stoia Geller Rudman & Robbins LLP and Roy Jacobs & Associates. Should the any of classes eventually be certified, New Century's current financial woes could worsen significantly. According to New Century's financial records, the company had cash and liquidity in excess of $350 million at December 31, 2006.
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