New Century Agrees to Settle NY Pension Fund Lawsuit

August 11, 2010 ( - A federal judge has approved a $125-million settlement of a class-action lawsuit by former shareholders of New Century Financial Corp.

Reuters reports that the preliminary settlement calls for former New Century directors and officers to pay $65.1 million, the auditor KPMG LLP to pay $44.75 million, and investment banking underwriters to pay $15 million, according to court records. New Century itself was not a defendant because of its April 2007 bankruptcy.  

Investors led by the New York State Teachers’ Retirement System pension fund accused the lender of concealing its fast-deteriorating financial condition. The lawsuit covers people who bought common stock, preferred stock or call options, or sold put options, from May 2005 to March 2007, according to Reuters.  

On July 30, the U.S. Securities and Exchange Commission said three former New Century executives — Chief Executive Brad Morrice, Chief Financial Officer Patti Dodge and Controller David Kenneally — agreed to pay more than $1.5 million to settle allegations they did not disclose the risks at New Century before its bankruptcy. Morrice and Dodge were also defendants in the investor lawsuit.  

A November 8 hearing is set to consider final approval.  

In a settlement of a lawsuit by the New York State Common Retirement Fund and five New York City public pension funds against Countrywide Financial Corp over that lender’s mortgage practices, KPMG agreed to pay $24 million (see NY Funds Reach Countrywide Suit Agreement).