Closing in on New Century

Nearly $20 million in stock sales by executives of the now-defunct OC mortgage lender are at the center of the Justice Department's criminal investigation, reports the LAT. No charges have been filed, and attorneys for the executives say that none of the sales were based on inside information. They also point out that the New Century executives still had most of their shares when the company went under. (This is a common refrain among other executives who sold large amounts of stock as the defaults were starting to pile up.) The Times conducted its own inquiry into New Century, focusing on options activity.

* Company founders Robert K. Cole and Edward F. Gotschall adopted trading plans in June 2006 and then started new ones less than a year later, amid rising loan defaults. Between June and September 2006 alone, the rate of loans that were delinquent more than 60 days climbed nearly 30%.

* Cole adopted a trading plan on Sept. 15, 2006, and sold 25,000 shares under it the same day. Two other executives, Chief Financial Officer Patti M. Dodge and Executive Vice President Kevin Cloyd, sold stock within a week of setting up their plans in February 2005. Legal experts say making trades so quickly after a plan is adopted weakens the protection offered by a trading plan, because prosecutors or shareholder attorneys could argue that the plans were drafted to facilitate a quick dumping of shares.

* All six executives either enacted plans or made trades on the same dates as other executives, which legal experts say could raise questions about whether they were acting in concert on inside information.

* The trades do not appear to follow regular patterns. Over two years, for example, Morrice made only two sales under his trading plan -- and both were in July 2005, allowing him to sell $6.4 million worth of stock before the price fell about 40% later that summer. Typically, trading plans call for executives to sell a set amount of shares each month or quarter, experts say, and executives usually stick to the same plan for at least a year.

This is the kind of investigative work that's being pushed aside at most business news desks these days. The OC Register has also done a terrific job looking into the misdeeds within the mortgage industry.