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Judge OKs $125 mln New Century lawsuit settlement
August 11, 2010 / 3:58 AM / in 7 years

Judge OKs $125 mln New Century lawsuit settlement

* Ex-executives, auditors, underwriters to pay

* NY teachers’ pension fund is lead plaintiff

* Accusations that subprime lender hid deterioration

* New Century one of first major US lenders to collapse

NEW YORK, Aug 10 (Reuters) - A federal judge on Tuesday approved a $125 million settlement of a class-action lawsuit by former shareholders of New Century Financial Corp, one of the earliest and largest lenders to collapse during a mortgage and credit crisis that triggered a global recession.

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, court records show. 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 New Century 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.

In a ruling dated Tuesday, U.S. District Judge Dean Pregerson in Los Angeles called the settlement “fair, reasonable and adequate.” He set a Nov. 8 hearing to consider final approval.

New Century, once based in Irvine, California, had been the largest independent U.S. provider of subprime mortgages before seeking Chapter 11 protection.

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 demise.

None admitted wrongdoing. Morrice and Dodge were also defendants in the investor lawsuit.

A week ago, U.S. District Judge Mariana Pfaelzer granted preliminary approval to a $600 million settlement of a lawsuit in the same court against Countrywide Financial Corp over that lender’s mortgage practices. [ID:nN02102504]

KPMG, which audited Countrywide, agreed to pay $24 million as part of that settlement. Bank of America Corp (BAC.N) now owns Countrywide.

The case is In re: New Century, U.S. District Court, Central District of California, No. 07-00931. (Reporting by Jonathan Stempel in New York; Editing by Muralikumar Anantharaman)

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