Bankruptcy

New Century Creditors Target KPMG Role

As the subprime lender seeks to extend its contol over the Chapter 11 process, unsecured creditors call for a probe of the relationship with its fo...
Stephen TaubJuly 17, 2007

While New Century Financial Corp. seeks to retain control of its Chapter 11 process
in U.S. Bankruptcy Court, its unsecured creditors want to use the court to probe the relationship of former auditor KPMG to the collapsed subprime mortgage lender.

In a filing with the court in Wilmington, Del., the official committee representing New Century’s creditors sought the ability to force KPMG to produce documents related to its work for the company, according to the Associated Press.

The unsecured creditors want to examine documents related to KPMG’s audits, reviews of the company’s interim financial statements, audits and assessments of internal controls over financial reports, and other professional services provided to New Century, AP said, adding that the creditors committee is coordinating its investigation with court appointed examiner Michael J. Missal. The creditors also are seeking testimony from KPMG audit partner John Donovan and senior manager Mark Kim.

Missal said he believes KPMG may possess “vital” information about the company’s “accounting and financial statement errors, irregularities and misstatements,” AP said. KPMG resigned as New Century’s auditor on April 27.

KPMG spokesman Dan Ginsburg told CFO.com, “It’s not unusual for the work of an auditor to be reviewed in a bankruptcy case such as this. We are confident that any objective review will confirm that our work was performed in accordance with professional standards.” He added that KPMG’s last annual audit report for New Century was for its 2005 fiscal year.

A court hearing on the committee’s request is scheduled for Aug. 7, AP reported.

4 Powerful Communication Strategies for Your Next Board Meeting