New Century Probe Results to Be Aired

Judge Kevin Carey gave the defunct, Irvine, Calif.-based lender until Feb. 6 to come to terms with federal bankruptcy monitors, who have called for the report of an investigation by Michael J. Missal to be made public.

Last year, Carey named Missal as an examiner in New Century's case. Missal is charged with looking into the accounting missteps that caused New Century to file erroneous financial statements with the Securities and Exchange Commission for 2005 and 2006.

That report has yet to be filed. Missal said that continued foot-dragging by the defunct lender, former leaders and accounting firm KPMG will hold it up until March.

He has, however, filed his findings on a probe of the possible mishandling of cash by the company after it filed for protection in the U.S. Bankruptcy Court in Wilmington, Del. in April 2006.

Filed Nov. 21, 2006, Missal's first report has remained cloaked at the insistence of New Century, which said attorney-client privilege shielded the findings.

"The debtor's main motivation here was to prevent embarrassment over, among other things, having given allegedly misleading information to the examiner," Carey said, adding, "The assertion of attorney-client privilege is a smoke screen."

The judge said New Century's call to keep the report sealed for an indefinite period "demonstrates a bunker mentality" by the remnants of what was until last year one of the country's largest subprime home lenders.

He also commented he was "singularly unimpressed" by a 59-page reply to the Missal report filed by New Century, which is also under seal.

Joseph McMahon, trial attorney with the Office of the U.S. Trustee, said New Century had failed to show it was entitled to any of the exemptions offered in the bankruptcy code to the right of public access to court documents.