KPMG faces $1bn sub-prime lawsuit

New Century Financial, which collapsed in April 2007, left banks and investors with huge losses on mortgage-backed securities they bought from the lender.

Two lawsuits have been filed against KPMG, the world's third largest accountancy firm, by a trustee representing its creditors.

A New York court action, filed against KPMG's US operations, accuses auditors of approving "materially misstated" financial reports. The second suit, filed in Los Angeles against KPMG International, said the parent company was reckless and negligent in its managing of its US business.

The trustee said KPMG was flouting laws introduced after the collapse of Enron in 2001, which were designed to increase the independence and oversight of auditors.

The trustee said: "As New Century's Auditor, KPMG failed in its public watchdog duty. KPMG has vowed to fight the claims.

This article was first published by IFAonline, part of the Incisive Media group.