Thursday, November 9, 2006
Five former senior executives of defunct credit card issuer NextCard, Inc. settled an SEC civil securities action related to accounting fraud that hid problems at the company. The defendants are: John Hashman, CEO; Yinzi Cai, president and COO; Bruce Rigione, CFO; Douglas Wachtel, controller; and, Jeremy Lent, chairman and chief strategy officer. According to the SEC Litigation Release (here):
[B]y late 2000 NextCard's credit card losses and delinquencies were higher than expected. The complaint alleges that, in order to conceal this information from investors, the defendants resorted to a series of undisclosed accounting adjustments that artificially lowered NextCard's reported credit losses and delinquencies for fiscal year 2000 and the first and second quarters of fiscal 2001, and misled investors about the health of the company's credit card loan portfolio. NextCard declared bankruptcy in 2002.
In addition to permanent injunctions, the defendants will pay a total of approximately $1.4 million in disgorgement of proceeds from the sale of company stock, penalties, and prejudgment interest. Lent will pay the greatest amount, $894,000. (ph)