Litigation

Fiduciary Duty Claims against Subprime Lender in Bankruptcy

By Francis G. X. Pileggi, Esq.

A recent report by an independent examiner for a trustee of subprime lender, New Century,  in bankruptcy, has described in a 581-page report, various bases for causes of action against officers and directors for breach of fiduciary duty, as well as claims against their accounting firm KPMG in connection with, for example, publicly reporting profits of over $60 million for a given period,  when in reality they should have reported a loss-- but the managment paid themselves very large bonuses based on the reported profits that were allegedly due to accounting errors.  One claim may be to attempt some recoupment of those bonuses. This is a classic instance of corporate governance issues arising in bankruptcy. Hat tip to Kevin LaCroix for his characteristically complete treatment of this matter, with much more detail and links to the report, here.

Full post as published by Delaware Corporate and Commercial Litigation Blog on March 27, 2008 (boomark / email).