IRVINE, Calif., March 27 (UPI) -- Accounting irregularities may have caused the collapse of Irving, Calif., subprime lender New Century Financial.
A five-month probe led by former investigator of the Securities and Exchange Commission Michael J. Missal concluded that "accounting irregularities," initiated at the firm KPMG, "almost always resulted in increased earnings."
The accounting practices led to huge bonus checks for founders of the company, which gave investors the impression the company was healthy, The New York Times reported Thursday.
In e-mail messages concerning an audit of the company, accountants "acquiesced overly to the client, which in the post-Enron era seems mind-boggling," Missal told the paper.
Missal's report says that company executives and KPMG could be legally liable.
Century's founders Edward F. Gotschall, Robert K. Cole and Bradley A. Morrice made more than $40.5 million between 2004 and 2006 selling shares of the company, the report said.
The lender was forced into bankruptcy in April 2007.
KPMG said it followed established guidelines. Spokeswoman Kathleen Fitzgerald told the Times, "we strongly disagree with the report's conclusions concerning KPMG."
"We believe an objective review of the facts and circumstances will affirm our position," she said.
