Bad News for KPMG: 'Scathing' Report Blames Accountant for Lender's Failure
A critical report by a lawyer and former SEC official breaks new ground by blaming a Big Four accountant for a failed subprime mortgage lender’s “improper and imprudent practices,” and is viewed as a likely signpost pointing toward potential mortgage-related litigation in a new arena.
Investigating on behalf of a bankruptcy trustee, attorney Michael Missal says in a “scathing” report that KPMG, acting as an auditor, condoned and enabled New Century Financial’s adoption of new accounting practices that permitted the mortgage lender to report a profit instead of a loss at the height of the nation’s mortgage mania, according to the New York Times.
“The report is the most comprehensive and damning document that has been released about the failings of a mortgage business,” the newspaper says. “Some of its accusations echo charges that surfaced during the collapse of Enron, the energy giant, which collapsed in accounting fraud almost seven years ago.”
As discussed in an earlier ABAJournal.com post, the report, which is part of a bankruptcy examination that has cost more than $12 million, has been eagerly awaited.
Missal is a partner in the Washington, D.C., office of Kirkpatrick & Lockhart Preston Gates Ellis. A law firm press release discusses his report and provides links to it.
