On April 30, 2008, Lead Plaintiff filed an Amended
Consolidated Class Action Complaint. Click
here to view the
Complaint.
This action arises from the sudden collapse of New Century, a now
bankrupt mortgage finance company focused on the subprime credit market. New Century was organized as a
real estate investment trust (“REIT”) under the laws of the State of Maryland, with its principal executive offices in Irvine, California.
Until recently, the Company’s common stock traded on the New York Stock Exchange (“NYSE”) under the symbol “NEW.”
Throughout the Class Period, New Century and the Individual
Defendants artificially inflated the price of its securities through false and misleading statements concerning its
management of the significant risks inherent in its mortgage lending business. In particular, the Company maintained
grossly inadequate reserves against losses associated with loan delinquencies. These understated reserves, which detract
directly from the Company’s earnings, caused the Company to significantly overstate its publicly reported earnings. The manipulation
likewise created the false impression that New Century employed appropriate mechanisms and procedures to manage the risks associated
with its subprime lending business, thereby bolstering the Company’s numerous false statements to that effect during the Class Period.
The investing public began to learn the true state of affairs at the Company
when, on February 7, 2007, New Century announced that it would restate its financials for the first three quarters of 2006
and delayed filing its annual report on Form 10-K for the fiscal year ended December 31, 2006. According to the Company, its
“restated net income [would be] significantly lower than previously reported” for all three quarters as a result of the improper application of
generally accepted accounting principles (“GAAP”) to the Company’s financial reserves for loan delinquencies. In essence, New Century
admitted to overstating its financial performance by maintaining inadequate reserves to cover the bad loans for which it was liable.
Subsequently, the Company has admitted that it is likely its financial statements for prior periods were similarly misstated.
The February 7, 2007 announcement stunned the market,
wiping out over $600 million in market value in a one-day 36% drop from $30.16 to $19.24 per share, and commenced a steady
decline in the price of New Century stock to its current, nearly worthless levels. Since the beginning of these disclosures, over
$1.6 billion in market capitalization has been eliminated. The Securities and Exchange Commission (“SEC”), U.S. Attorney’s Office,
and the Market Trading Analysis Department of the NYSE all have commenced investigations.
Firm partners Blair A. Nicholas, Salvatore Graziano and
Hannah Ross and
associates Lauren McMillen and
Takeo Kellar are responsible for prosecuting this action.
