( Update II: Quotes added from defendants attorneys. ) The Securities and Exchange Commission today charged three former executives of failed Irvine-based subprime lender New Century Financial with fraud for allegedly misleading investors as the business was “collapsing” in 2006. Robert Khuzami, the agency’s director of enforcement, said, “New Century shareholders took a double-hit: The company’s mortgage assets and business performance became increasingly impaired, and management manipulated its numbers and concealed its deteriorating performance.” The SEC is charging former chief executive and co-founder Brad Morrice of Laguna Beach; former chief financial officer Patti Dodge of Irvine; and former controller David Kenneally of Rossmoor. The complaint, filed in federal court in the Central District of California, seeks civil penalties and from Morrice and Dodge reimbursement of bonuses and other incentive or equity-based compensation. In addition, the SEC is seeking a severe personal penalty against the three: a bar against ever again serving as officers or directors of a publicly traded company. Josh Epstein, a spokesman for Proskauer, the law firm representing Morrice, called the SEC’s charges against the former executive “flatly false.” “Brad did all he could to save the company and to accurately report the company’s numerous challenges to its shareholders,” Epstein said. “While his efforts failed, there was no fraud.” Morrice remained a large shareholder until the end, losing millions of dollars when New Century filed for bankruptcy in April 2007, Epstein said. “Brad was among the biggest victims of the company’s collapse,” he said. Terry Bird, an attorney for Dodge, said, “We believe the evidence will show that Ms. Dodge fully and completely fulfilled all her fiduciary and corporate obligations to New Century and its shareholders.” “She looks forward to responding to these allegations and clearing her good name,” Bird said.

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