Cash Management

Public Shame for New Century

The bankrupt company must reveal an embarrassing report about its cash mismanagement, a court rules.
Stephen TaubJanuary 10, 2008

A federal bankruptcy judge has ruled that New Century Financial must publicly disclose the results of a potentially embarrassing investigation into possible mishandling of cash, the Associated Press reported.

The one-time mortgage lending giant has been trying to keep the report under seal, but judge Kevin Carey gave the company until Feb. 6 to provide it to federal bankruptcy monitors.

In addition, Michael Missal, a court-appointed monitor looking into the collapse of New Century, has requested extra time to complete his probe into the circumstances that led to the company filing erroneous financial statements with the Securities and Exchange Commission.

His report was due by Jan. 15, but he wants until March 17, asserting that former company executives and former auditor KPMG have delayed his work, according to Reuters.

Missal, a partner at Kirkpatrick & Lockhart Preston Gates Ellis in Washington, in November filed his findings on a probe of the company’s possible mishandling of cash after it filed for bankruptcy protection in April 2007, according to the AP. That’s the report New Century had insisted be kept secret.

“The debtor’s main motivation here was to prevent embarrassment over, among other things, having given allegedly misleading information to the examiner,” Carey reportedly said. “The assertion of attorney-client privilege is a smoke screen.”

As for his larger probe into possible wrongdoing at New Century, Missal said in a filing that he has made substantial progress, but that “significant delays” in obtaining information from New Century and KPMG require that he get more time to review documents, conduct interviews and finish his analysis, according to Reuters.

Missal was lead counsel to the examiner in WorldCom’s bankruptcy.

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