A bankruptcy court-appointed investigator looking into accounting issues at Irvine’s New Century Financial Corp. said the subprime lender may have misspent up to $20 million of investor money after filing for bankruptcy.
Michael Missal, a partner with Kirkpatrick & Lockhart Preston Gates Ellis LLP’s Washington, D.C., office, said in a court filing that New Century had spent money claimed by banks without getting bankruptcy court permission.
The court filing was made in November but was kept under file until Thursday.
Missal was appointed as examiner in the case by Delaware’s bankruptcy court in June. New Century filed for Chapter 11 protection in April and is currently working on formulating a plan of liquidation.
Missal’s also investigating what caused New Century to call for a restatement of its 2005 and 2006 financial statements but has complained about New Century’s foot-dragging in turning over documents, including hundreds of thousands of e-mails.
Missal said his investigations have cost more than $21 million. If New Century and its lawyers had been more forthright with the court, the probe would have been much cheaper, and possibly called off, he said.
In a response to the examiner’s report, New Century’s lawyers said in a filing this week “that they made no misleading statements, much less misstatements, to the examiner on this or any other topic.”
