New Century Financial Corp. co-founder Edward F. Gotschall recently tried to reassure friends and family that his life was alright, despite troubles at his company.
The e-mail, a copy of which was forwarded to the Orange County Register, offers rare insight into the state of mind of executives at the Irvine-based subprime lender, which is struggling to keep its doors open amid an industry meltdown.
“(T)he carnage probably won’t end for some time,” Gotschall said in the March 16 message.
Last year, Irvine-based New Century was the nation’s second largest originator of subprime loans, which are offered to people with low credit scores or unreliable sources of income.
“So much for a calm retirement!” wrote Gotschall, 52, who retired last year as vice chairman for finance at the company, but still serves as a director on New Century’s board. “I do want you to know that I’ve got great attorneys working with me, a significant Directors and Officers Liability Policy with the company and the knowledge that I haven’t done anything wrong, something you wouldn’t be able to figure out if you read the papers or listen to the news.”
New Century’s creditors cut off funding and demanded the company buy back about $8 billion in loans after the Irvine subprime lender announced it would have to restate its financial results for 2006 and faced criminal and civil investigations for its financial and trading practices.
Gotschall declined to comment further for this article. His spokesman, Charles Sipkins, issued a statement: “While we will not comment on specific regulatory and legal matters, Mr. Gotschall has and will continue to cooperate with the investigation.”
Gotschall co-founded New Century in 1995 with Brad Morrice, the company’s current president and chief executive, and Robert K. Cole, who stepped down as CEO last year.
Since January 2006, Gotschall has made a net $15.5 million on sales of company stock, according to Securities and Exchange Commission filings.
Here is the full text of the email:
Subject: Situation Update
Hello to All:
Many of you have expressed your concern and offered your friendship during what has been a very trying time for my family, and I just wanted to take a second and thank you each for your concern and friendship. The New Century Story of the past 40 days has been quite amazing to experience and the carnage probably won’t end for some time. (So much for a calm retirement!) I do want you to know that I’ve got great attorneys working with me, a significant Directors and Officers Liability Policy with the company and the knowledge that I haven’t done anything wrong, something you wouldn’t be able to figure out if you read the papers or listen to the news.
One thing for sure: I’m way smarter today than I was 40 days ago, and I believe some good things will come from this. Susan and I will emerge with a stronger relationship than ever once this process is over. While the situation has been tough on both of us and we both have our down periods, we’re doing fine. The financial losses that we’ve suffered have provided the opportunity to evaluate what is really important. We are learning to look at what we have, not what we’ve lost. I think this is a good thing! We have been blessed more than most and have many things to be thankful for, including our friendship with each of you. We’ll grow from this experience and be better as a result.
I’ve been pretty tied up the past few weeks and probably will be for the next few weeks waiting for things to happen and decisions that need to be made at NEW, but hope to start re-engaging in real life after that time. Thank you again for your thoughts and prayers.
Ed
Contact the writer: 714-796-7969 or jgittelsohn@ocregister.com
