In its complaint, the SEC alleges that Mr. Morrice and Ms. Dodge, despite knowledge of New Century’s dire financial condition, issued positive public statements to investors, including assertions that New Century’s “commitment to responsible lending is good business” and that the company was outperforming its peers. The SEC further alleges that Ms. Dodge and Mr. Kenneally, who were responsible for the company’s accounting practices, lowered New Century’s cash reserves despite a rising loan-default rate, which is a violation of Generally Accepted Accounting Rules.
The SEC is seeking an order requiring the defendants to, among other things: (1) disgorge their alleged ill-gotten gains with prejudgment interest, (2) reimburse the Company for certain bonuses and incentive-based compensation, and (3) pay civil monetary penalties.